ICE Benchmark Administration (IBA), the authorized and regulated administrator of LIBOR, has provided an update regarding the cessation of U.S. dollar LIBOR.
In line with previous statements, the UK Financial Conduct Authority (FCA) has decided to exercise its powers under the UK Benchmarks Regulation (BMR) to compel IBA to continue to publish the 1-, 3- and 6-month “synthetic” U.S. dollar LIBOR settings using an unrepresentative “synthetic” methodology until September 30, 2024.
The FCA has stated that it has no intention to compel publication beyond this date and has issued a reminder of the expected cessation of these final three remaining LIBOR settings after publication on Monday, Sept. 30, 2024. No new LIBOR settings are expected to be published following this date.
“Synthetic” LIBOR settings that are required to be published using a “synthetic” methodology are not representative of the underlying market or economic reality the setting was intended to measure prior to such requirement. The use of “synthetic” LIBOR settings by UK supervised entities is prohibited under the UK BMR, subject to the FCA permitting use by UK supervised entities in legacy contracts other than cleared derivatives.
Users of LIBOR should take appropriate legal and regulatory advice in all relevant jurisdictions to ensure they understand and are prepared for the impact of the cessation of the remaining “synthetic” LIBOR settings on them and their counterparties under any applicable legislation or regulation, financial contracts, financial instruments and other arrangements.
More information is available on IBA’s LIBOR webpage and the FCA’s LIBOR transition webpage.
