Announces decision on cessation of 1- and 6-month synthetic sterling LIBOR at end-March 2023

We previously required ICE Benchmark Administration (IBA), the administrator of LIBOR, to continue publication of the 1-, 3- and 6-month sterling and yen LIBOR settings for an additional year after end-2021, using a synthetic methodology. This was to help mitigate the risk of widespread disruption to legacy LIBOR contracts which had not transitioned by end-2021 when the sterling and yen LIBOR panels ended.

We consulted in June 2022 on winding down 1- and 6-month synthetic sterling LIBOR in end-March 2023. We recognized that market participant would value having a period of notice before the cessation of synthetic sterling LIBOR and that it would take a certain amount of time to announce the outcome of the consultation. In line with the consultation, we have decided to require continued publication of the 1- and 6-month synthetic sterling LIBOR settings for a further 3 months after the end of 2022, until 31 March 2023. The majority of respondents to our consultation agreed that the 1- and 6-month synthetic sterling LIBOR settings could cease in an orderly fashion in end-March 2023, or were neutral. Some responses noted that remaining exposure to these settings is low, and some said that having a confirmed cessation date could help support remaining transition efforts.

We have no intention to use our powers to compel IBA to continue to publish the 1- and 6-month synthetic sterling LIBOR settings beyond this, and therefore these settings will permanently cease immediately after final publication on 31 March 2023.

Market participants need to ensure they are prepared for the permanent cessation of 1- and 6-month synthetic sterling LIBOR on 31 March 2023. In line with our statement published in August 2022, issuers and holders of outstanding bonds referencing sterling LIBOR need to agree to convert these bonds to fair alternative rates if they don’t have robust fallbacks in place. Lenders and borrowers will also need to agree on appropriate arrangements for any outstanding loans referencing sterling LIBOR. Feedback to our consultation suggested that some private finance initiative (PFI) loans remain linked to 6-month sterling LIBOR, and we encourage all relevant parties to ensure these contracts are amended as a matter of priority.

For synthetic yen LIBOR, market participants should be prepared for publication to cease permanently at end-2022, as we have set out previously.

Our consultation also asked for views on when the 3-month synthetic sterling LIBOR setting could cease in an orderly fashion. We are currently considering responses to this question. There was support for continuing the 3-month synthetic sterling LIBOR setting for a limited period beyond end-March 2023. While there was some variation in views, a significant number of respondents argued for giving advance notice that the 3-month setting would end after that limited period of continued publication. Those market participants who still have contracts referencing 3-month synthetic sterling LIBOR should be preparing for its cessation in due course. We are considering the appropriate date for such cessation in light of the feedback received and will provide further information when we publish our summary of feedback on that question.

Leave a Reply

Your email address will not be published. Required fields are marked *