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LIBOR TRANSITION UPDATE: q1 2021

A refresher on the key announcements made in the LIBOR transition world during Q1 of 2021

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FCA announcement on future cessation and loss of representativeness of the LIBOR benchmarks

In March this year, the FCA confirmed that all 35 LIBOR settings will either cease to be published by the ICE Benchmark Administration and/or will no longer be representative following these dates:

Date Cessation and/or lack of representativeness
31 December 2021
  • All GBP LIBOR settings
  • All Euro LIBOR settings
  • All Swiss Franc LIBOR settings
  • All Japanese Yen (JPY) settings
  • 1-week and 2-month USD LIBOR settings
30 June 2023
  • All remaining USD LIBOR settings (overnight, 1-month, 3-month, 6-month and 12 month)

The FCA says it will still consult about the possibility of requiring the IBA to publish a form of “synthetic” LIBOR in the following tenors:

  • GBP LIBOR: 1-month, 3-month and 6-month.
  • USD LIBOR: 1-month, 3-month and 6-month.
  • JPY LIBOR: 1-month, 3-month and 6-month.

No forward-looking overnight rate this year?

The Alternative Reference Rates Committee (ARRC) announced in March that it will not be in a position to recommend any forward-looking Secured Overnight Financing Rate (SOFR) term rate by mid-2021.

In its announcement, ARRC encouraged market participants to continue to the transition away from LIBOR using tools available now.

Bank of England and FCA recommend SONIA from 11 May

The Bank of England announced in March that it and the FCA “support and encourage liquidity providers in the sterling non-linear derivatives market to adopt new quoting conventions for inter-dealer trading based on SONIA instead of LIBOR from 11 May this year.

This is to support market participants in meeting a key milestone set by the Working Group on Sterling Risk-Free Reference Rates: To cease initiating new GBP LIBOR-linked non-linear derivatives that expire after 2021 by the end of Q2 2021.

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