FCA Warns as Final Month of Libor Starts

The UK’s Financial Conduct Authority (FCA) has issued a final message to market participants one month ahead of the cessation of the last Libor panel, the US dollar benchmark.

In November 2022, the FCA consulted on its proposals for a synthetic US dollar Libor and in April confirmed it would require IBA, Libor’s administrator, to continue to publish the one-, three- and six-month US dollar Libor settings in synthetic form until end-September 2024.

That said, the regulator reiterates that synthetic Libor settings are “not representative”, and are only a temporary solution to allow more time to complete transition and ensure the orderly wind-down of Libor. “Firms must continue to actively transition contracts that reference Libor to appropriate, robust reference rates, and we continue to expect firms to deliver demonstrable progress,” the FCA states.

Ahead of the 30 June 2023 deadline, it says market participants must be prepared for the cessation of the overnight and 12 month-US dollar Libor settings after final publication on 30 June 2023. It adds the synthetic settings are for use in legacy contracts only (other than in cleared derivatives).

“All new use of these remaining US dollar Libor settings will be prohibited,” the FCA states. “This overrides the exemptions we permitted to the restriction on new use imposed from 1 January 2022, and as such all new use will be prohibited under the UK Benchmarks Regulation from 1 July 2023.