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At the End of March 2023, U.K Financial Conduct Authority Will Stop Using One- And Six-Month “Synthetic” Sterling LIBOR

The U.K. has joined Intercontinental Exchange, Inc. (NYSE:ICE), a major global provider of data, technology, and market infrastructure. The 1- and 6-Month “synthetic” sterling LIBOR settings will continue to be published by ICE Benchmark Administration Limited (IBA) through March 31, 2023, per the Financial Conduct Authority’s (FCA) decision.

The FCA sought input on when it may stop forcing IBA to post 3-Month “synthetic” sterling LIBOR and noted there was support for continuing to require it for a short time after the end of March 2023. In light of the feedback it has received, the FCA is debating the best time for such a cease. When it publishes a summary of that feedback, it will provide more details.

The 1- and 6-Month “synthetic” sterling LIBOR settings will permanently end on March 31, 2023, following the FCA’s announcement that it had no intention of using its authority to force IBA to continue publishing them after that date in light of the results of a consultation.

After December 31, 2021, no longer will any Swiss franc or euro LIBOR settings, 1 Week or 2 Month US dollar LIBOR settings, Overnight/Spot Next, 1 Week, 2 Month or 12 Month sterling, or Japanese yen LIBOR settings be published. IBA must use a modified, unrepresentative “synthetic” approach to publish the 1-, 3-, and 6-Month sterling and Japanese yen settings for the duration of 2022 as required by the FCA. The “synthetic” JPY LIBOR settings will stop at the end of 2022, according to the FCA.

A decision to require IBA to create “synthetic” U.S. dollar LIBOR for a brief period would have ramifications for market players, hence the FCA sought information regarding U.S. dollar LIBOR exposures that could last through the end of June 2023 as part of its consultation. The FCA is reviewing the comments submitted and intends to respond later in the 2022 fall season.

Currently, the “panel bank” LIBOR technique is used in the publication of the Overnight and the 1-, 3-, 6-, and 12-Month U.S. dollar LIBOR settings. Up to the end of June 2023, when panel banks will stop making contributions and the Overnight and 12-Month U.S. dollar LIBOR settings will end permanently, IBA anticipates continuing to determine and publish these settings on this basis. The FCA has announced that it will evaluate the case for mandating that the 1-, 3-, and 6-Month U.S. dollar LIBOR settings continue to be published using an erroneous, “synthetic” methodology after June 2023.

News Summary:

  • At the End of March 2023, U.K. Financial Conduct Authority Will Stop Using One- And Six-Month “Synthetic” Sterling LIBOR
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