ISDA Statement on UK FCA LIBOR Announcement

Published 

ISDA has published the following statement in response to today’s announcement by the UK Financial Conduct Authority (FCA) on the future cessation and loss of representativeness of the LIBOR benchmarks.

“Today’s announcement constitutes an index cessation event under the IBOR Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks Protocol for all 35 LIBOR settings. As a result, the fallback spread adjustment published by Bloomberg is fixed as of the date of the announcement for all euro, sterling, Swiss franc, US dollar and yen LIBOR settings.

“The FCA specifically announced that certain LIBOR settings (all seven euro and Swiss franc LIBOR tenors, overnight, one-week, two-month and 12-month sterling LIBOR, spot next, one-week, two-month and 12-month yen LIBOR, and one-week and two-month US dollar LIBOR) will permanently cease immediately after December 31, 2021. Publication of the overnight and 12-month US dollar LIBOR settings will permanently cease immediately after June 30, 2023.

“The FCA further announced that it will consult on requiring ICE Benchmark Administration (IBA), the administrator of LIBOR, to continue publishing one-month, three-month and six-month sterling LIBOR on a non-representative, synthetic basis for a further period after the end of 2021, and one-month, three-month and six-month yen LIBOR on a non-representative, synthetic basis for an additional year after end-2021, under proposed new powers included in the Financial Services Bill.

“The FCA will also consider whether to require IBA to continue publishing one-month, three-month and six-month US dollar LIBOR on a non-representative, synthetic basis for a further period after the end of June 2023.

“The fallbacks (ie, to the adjusted risk-free rate plus spread) will automatically occur for outstanding derivatives contracts that incorporate the IBOR Fallbacks Supplement or are subject to adherence of the ISDA 2020 IBOR Fallbacks Protocol on the following dates:

  • After December 31, 2021: For outstanding derivatives referenced to all euro, sterling, Swiss franc and yen LIBOR settings.
  • After June 30, 2023: For outstanding derivatives referenced to all US dollar LIBOR settings. Under the fallbacks methodology, the rate for the one-week and two-month US dollar LIBOR settings will be computed by each calculation agent using linear interpolation between end-2021 and June 30, 2023, before falling back to the adjusted risk-free rate plus spread after June 30, 2023.

“The ISDA 2020 IBOR Fallbacks Protocol, which incorporates the fallbacks into legacy non-cleared derivatives trades with other counterparties that choose to adhere to the protocol, remains open for adherence on the ISDA website.”

This statement is for information purposes only. It does not constitute legal advice and should not be considered an explanation of all relevant issues. You should consult your legal advisors and any other advisor you deem appropriate in considering the issues discussed herein.

For additional information on benchmark reform, including the operation of new derivatives fallbacks, visit ISDA’s benchmark reform and transition from LIBOR page on the ISDA website.

  • Read ISDA Guidance on the FCA announcement on the LIBOR benchmarks here.
  • Read the Bloomberg technical notice on the fixing of the spread adjustment here.

Most recent episodes

40th Annual New York Cash Exchange: What Can Treasurers Expect?

Ahead of the 40th annual New York Cash Exchange, two of TMANY’s distinguished board members, David Miller and Timothy T. Hesler, CTP, provide TMI CEO, Robin Page, with a quickfire rundown of what attendees can expect from this year’s conference. Our guests share their aspirations for the event,...

00:00

Expectation-Beating Inflation Prints Ratchet Up Pressure on Monetary Policy

Welcome to the third edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 9th May...

04:48

Making the Sustainable Transition: A Roadmap to ESG in Treasury

Over the last 18 months, Societe Generale has experienced a steady increase in requests from their corporate clients to integrate ESG features in treasury management.  Louis-David Rouyer, Philippe Pougeard, and Emmanuelle Petelle (Societe Generale) provide TMI’s Eleanor Hill with a whistlestop run...

22:24

Lift Off for Fed Rate Rises

Welcome to the latest edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 5th of...

04:58

Treasury in 2022 and Beyond

Industry experts Bob Stark (Kyriba) and Sebastian di Paola (PwC) join TMI’s Editor, Eleanor Hill, to explore the very latest treasury trends – and to discuss how smart treasurers can get ahead of the game by ...

43:21

How BearingPoint Harnessed Data-Driven Forecasting with CashAnalytics and SAP

Listen back to our recent forecasting masterclass, where Group Treasurer Eveline Stam, and Conor Deegan (CashAnalytics) provided TMI’s Eleanor Hill with a comprehensive overview of how consultancy firm BearingPoint achieved company-wide cash forecasting nirvana by combining specialist solutions from...

37:14

The 3 T’s of The Future: Tech, Treasury, and Transformation

Over the past two years, an increasingly dynamic environment has not only accelerated technology development – from quantum computing to blockchain technology, and even the metaverse – but also technology adoption, bridging colleagues and breaking down silos in a remote work world. In this podcast,...

44:02

Monetary Policy Continues to Drive Markets as Ukraine Invasion Weighs on March Meetings

Welcome to the second edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 3rd of...

05:25

Tax Spotlight: How the OECD’s Two-Pillar Solution Impacts Treasury

Aaron Lee and Joseph Lee (DBS Bank) join TMI’s Eleanor Hill to discuss how the OECD’s Two-Pillar Solution aims to address the tax challenges arising from the digitalisation of the economy. Ahead of the 2023 implementation date multinational corporates will have much to consider around these reforms....

24:00

FX Connections: Bringing Transparency to Cross-Currency Payments

Cross-border activity is growing at a remarkable rate, making FX payments a hot topic for treasurers across the globe.  In this TreasuryCast episode, Eleanor Hill asks Daniela Eder and Gibran Maqsood (Barclays Corporate Banking) to provide their key action points around FX payments in 2022. Our guests...

21:00