FCA Issues Announcements on the End of LIBOR

The Financial Conduct Authority (FCA), the regulator of LIBOR, announced the dates that panel bank submissions for all LIBOR settings will cease, after which representative LIBOR rates will no longer be available.

The FCA has confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative as following timeline:

• immediately after 31 December 2021, in the case of all sterling, euro, Swiss franc and Japanese yen settings, and the 1-week and 2-month US dollar settings; and

• immediately after 30 June 2023, in the case of the remaining US dollar settings

This is an important step towards the end of LIBOR, and the Bank of England and FCA urge market participants to continue to take the necessary action to ensure they are ready.

Nikhil Rathi, the CEO of FCA CEO commented,“Today’s announcements provide certainty on when the LIBOR panels will end. Publication of most of the LIBOR benchmarks will cease at the same time as the panels end. Market participants must now complete their transition plans.”

Andrew Bailey, Bank of England Governor said,“Today’s announcements mark the final chapter in the process that began in 2017, to remove reliance on unsustainable LIBOR rates and build a more robust foundation for the financial system. With limited time remaining, my message to firms is clear – act now and complete your transition by the end of 2021.”

Why LIBOR Going Away?

As a benchmark rate at which banks estimate they can lend money to other banks on an unsecured basis, LIBOR, or the London Interbank Offered Rate, was once dubbed the world’s most important number, used for pricing a wide range of debt from home and company loans to credit cards.

However, post the financial crisis in 2008, international regulators and panel banks began to question the long-term sustainability of the LIBOR framework due to the increasing reliance on expert judgement from the panel banks and insufficiency of transaction data, especially after several banks were fined billions of dollars for trying to minipulate.

In 2017, FCA indicated that the publication of LIBOR is likely to discontinue at the end of 2021.