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LIBOR cessation date set

The FCA has today issued the official death knell for LIBOR. The announcement constitutes an index cessation event under the IBOR Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks Protocol for all 35 LIBOR settings. 5 March 2021 is therefore the date on which the fallback spread adjustment will be fixed. Publication of 26 LIBOR settings will permanently cease immediately following the two dates below:

  • 31 December 2021–  all seven euro LIBOR settings, all seven Swiss franc LIBOR settings, the spot next, 1-week, 2-month and 12-month Japanese yen LIBOR settings, the overnight, 1-week, 2-month and 12-month sterling LIBOR settings, and the 1-week and 2-month US dollar LIBOR settings
  • 30 June 2023– the overnight and 12-month US dollar LIBOR settings

The remaining nine settings will cease to be published, or will be provided on a synthetic basis:

  • 31 December 2021- the 1-month, 3-month and 6-month Japanese yen LIBOR settings and the 1-month, 3-month and 6-month sterling LIBOR settings
  • 30 June 2023- the 1-month, 3-month and 6-month US dollar LIBOR settings

The announcement states that, as of the dates above, all 35 LIBOR settings will therefore cease to be provided or will no longer be representative of the underlying market and economic reality they are intended to measure and that representativeness will not be restored.

The announcement follows the conclusion of the consultation by ICE Benchmark Administration (IBA) and its consequent decision to cease publication.  Although nobody could accuse the FCA of not giving enough prior warning, the announcement will come as a surprise to many. Market consensus expected the official index cessation announcement some months hence and some still believed that the final date would be significantly delayed.

The derivatives market is relatively well-prepared.  While some questions remain around non-linear products, the Protocol has 13,477 adherents as of today and bilateral amendment projects are well underway. Some participants in the loan and bond markets have a steeper hill to climb. More than merely focussing attention, today’s announcement forces all affected to double-down on their transition efforts.

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