The FCA has given permission for the ICE Benchmark Administration Limited to publish a version of the US dollar London Interbank Offered Rate (LIBOR) for a limited time after June 30th, 2023.
At the start of 2021, FCA declared that they will discontinue publishing LIBOR for various currencies. Including the pound, sterling, euro, Swiss franc, Japanese yen, and the one-week and two-month US dollar settings.
The regulator also announced their intention to end the remaining US dollar settings on June 30, 2023.
The FCA made the decision after banks had distorted LIBOR, Which damaged its reputation as a sign of the price of unsecured lending between financial institutions.
In 2021, they allowed temporary use of “synthetic” sterling and Japanese yen LIBOR rates in all LIBOR agreements that had not been amended prior to the end of the year.
A year later, the regulator proposed the use of “synthetic” US dollar LIBOR, as regulatory figures showed that $70 trillion worth of dollar LIBOR exposures remained after June 2023.
The FCA has agreed for IBA to calculate the three US dollar LIBOR settings. By adding the CME Term Secured Overnight Financing Rate (SOFR) Reference Rate to the ISDA fixed spread adjustment.
The FCA said:
We intend that publication of the 1-, 3- and 6-month synthetic US dollar LIBOR settings will cease on 30 September 2024. We will review our decision, in line with the requirements of the Benchmarks Regulation. However, unless unforeseen and material events were to happen, we expect to follow the direction and timeline we have indicated. We consider providing early notice of this is helpful for market participants.
They declared that the US dollar LIBOR overnight and 12-month benchmarks will be permanently discontinued on June 30, 2023.
The 1 and 6-month synthetic sterling LIBOR settings were also discontinued. And the last publication took place on March 31, 2023.
From January 1, 2022, the IBA was required to publish the one, three, and six-month synthetic sterling LIBOR settings. And the three-month setting being ceased on March 28, 2024.
Furthermore, the listed US dollar settings can be used for all legacy contracts, apart from cleared derivatives.
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