Further updates to cessation of remaining LIBOR settings

By Yu Zhang, Natalia Bogatyreva
Banking & Finance Financial Services Risk & Compliance

Get your transition plans in place 3 min read

On 29 September 2022, the UK LIBOR regulator, the FCA, announced it will no longer require publication of one-month and six-month GBP LIBOR beyond 31 March 2023.

At the end of last year, 24 of the 35 LIBOR settings ceased being published. For details see our previous Insight.

The cessation dates for the remaining LIBOR settings (generally the more commonly used ones) have either been set already or are currently being considered by the FCA. They are likely to be sometime next year.

Anyone with exposure to the remaining LIBOR settings will need to ensure they have plans to transition away from LIBOR ahead of the relevant cessation dates.

Key takeaways

  • If you have any contracts referencing one-month and six-month synthetic sterling LIBOR settings, this will affect you.
  • If your contract contains fallbacks for the relevant sterling LIBOR settings, those fallbacks may be triggered by the recent announcement, and the setting will no longer apply in your contract on the relevant date.
  • If your contract uses the relevant sterling LIBOR settings but does not contain fallbacks, and is expected to survive beyond the relevant cessation date, you need to amend your contract ahead of that date.
  • LIBOR transition is a complex project which may well affect many aspects of a business. Make sure you have a bespoke strategy to facilitate a targeted and efficient transition to a new benchmark that works for you.

Who in your organisation needs to know about this? 

Users of loans, derivatives and other products referencing LIBOR, corporate treasurers, benchmark transition project team, legal counsel, risk and compliance.

The story so far... 

In the last year:

  • all LIBOR settings in GBP, JPY, EUR and CHP ceased after 31 December 2021 other than one-month, three-month and six-month settings in GBP and JPY;
  • one-week and two-month USD LIBOR settings ceased after 31 December 2021; and
  • the overnight and 12-month USD LIBOR settings were to cease after 30 June 2023.

This left the remaining nine commonly used settings, ie one-month, three-month and six-month settings in USD, GBP and JPY to be published temporarily on a 'synthetic' basis.

For details see our previous Insight.

What did the recent FCA announcement say about these remaining LIBOR settings?

Permanent cessation of two common GBP LIBOR settings

Following a public consultation, the FCA announced that one-month and six-month synthetic sterling LIBOR settings will permanently cease to be published after 31 March 2023.

The consultation revealed support for requiring the continuation of three-month 'synthetic' sterling LIBOR for a limited period beyond 31 March 2023. The FCA is considering the appropriate date and will provide further information when it publishes its summary of feedback on that question.

Remaining LIBOR settings in USD and JPY

The FCA is assessing the feedback it received in relation to one-month, three-month and six-month USD settings and expects to respond towards the end of this year.

The FCA has also stated that the remaining synthetic JPY settings will cease at the end of this year.

Why does this matter? 

Final cessation dates have now been set for a number of the remaining LIBOR settings in GBP and JPY. These are some of the more commonly used settings, so any agreements, documents, transactions or processes still relying on these settings will need to be transitioned to a new benchmark.

In relation to the last USD settings, watch this space.

For specific questions or further information

Please get in touch with Allens' teams of experts to learn more about how we can assist with your benchmark transition project or any other questions in relation to derivatives more generally.