Shorter Reads

Libor transition update: Synthetic rates for Sterling and Yen

The FCA has confirmed that synthetic rates will be published for 1, 3 and 6 month Sterling and Yen LIBOR from the 1st of January 2022, for at least 12 months.

1 minute read

Published 6 December 2021

Authors

Share

Key information

  • Specialisms
  • Dispute Resolution
  • Services
  • Banking & financial disputes
  • Sectors
  • Financial services

The FCA has confirmed that synthetic rates will be published for 1, 3 and 6 month Sterling and Yen LIBOR from the 1st of January 2022, for at least 12 months.

These rates will be available for use in all legacy contracts, except cleared derivatives, because clearing houses already plan to transition their instruments to risk-free rates by the end of this year.

How will Sterling synthetic LIBOR be calculated?

Sterling synthetic LIBOR will be calculated as follows:

  1. The ICE Term SONIA Reference Rate (“TSRR”), which measures the expectation of what SONIA will be over the relevant forward-looking time period (1, 3 or 6 months);
  2. Plus an ISDA credit adjustment spread for the relevant tenor.

The ISDA credit adjustment spreads were fixed earlier this year, when the FCA announced that LIBOR would cease. These were calculated on a 5-year historical spread between LIBOR and SONIA:

Currency Tenor Credit adjustment spread
GBP 1 month 0.0326
GBP 3 months 0.1193
GBP 6 months 0.2766

Message us on WhatsApp

Related latest updates
PREV NEXT

Related content

Arrow Back to Insights

Shorter Reads

Libor transition update: Synthetic rates for Sterling and Yen

The FCA has confirmed that synthetic rates will be published for 1, 3 and 6 month Sterling and Yen LIBOR from the 1st of January 2022, for at least 12 months.

Published 6 December 2021

Associated sectors / services

Authors

The FCA has confirmed that synthetic rates will be published for 1, 3 and 6 month Sterling and Yen LIBOR from the 1st of January 2022, for at least 12 months.

These rates will be available for use in all legacy contracts, except cleared derivatives, because clearing houses already plan to transition their instruments to risk-free rates by the end of this year.

How will Sterling synthetic LIBOR be calculated?

Sterling synthetic LIBOR will be calculated as follows:

  1. The ICE Term SONIA Reference Rate (“TSRR”), which measures the expectation of what SONIA will be over the relevant forward-looking time period (1, 3 or 6 months);
  2. Plus an ISDA credit adjustment spread for the relevant tenor.

The ISDA credit adjustment spreads were fixed earlier this year, when the FCA announced that LIBOR would cease. These were calculated on a 5-year historical spread between LIBOR and SONIA:

Currency Tenor Credit adjustment spread
GBP 1 month 0.0326
GBP 3 months 0.1193
GBP 6 months 0.2766

Associated sectors / services

Authors

Need some more information? Make an enquiry below.

    Subscribe

    Please add your details and your areas of interest below

    Specialist sectors:

    Legal services:

    Other information:

    Jurisdictions of interest to you (other than UK):

    Article contributor

    Enjoy reading our articles? why not subscribe to notifications so you’ll never miss one?

    Subscribe to our articles

    Message us on WhatsApp

    Please note that Collyer Bristow provides this service during office hours for general information and enquiries only and that no legal or other professional advice will be provided over the WhatsApp platform. Please also note that if you choose to use this platform your personal data is likely to be processed outside the UK and EEA, including in the US. Appropriate legal or other professional opinion should be taken before taking or omitting to take any action in respect of any specific problem. Collyer Bristow LLP accepts no liability for any loss or damage which may arise from reliance on information provided. All information will be deleted immediately upon completion of a conversation.

    I accept Close

    Close
    Scroll up
    ExpandNeed some help?Toggle

    Get in touch

    Get in touch using our form below.