FCA announces decision on synthetic US dollar LIBOR

Following a corresponding consultation (CP22/11) in June 2022, the Financial Conduct Authority (FCA) has now announced a final decision as regards the publication of the 1-, 3- and 6-month US dollar LIBOR on a synthetic basis beyond June 30, 2023. Based on the feedback it has received, the FCA states that it has decided to require such publication up to September 30, 2024. Thereafter, the publication will cease, if no exceptional circumstances arise. The calculation will be based on the „relevant CME Term SOFR Reference Rate plus the respective ISDA fixed spread adjustment“. A corresponding request has been sent to the administrator of LIBOR, the ICE Benchmark Administration Limited (IBA).
The FCA will permit the use of the synthetic US dollar LIBOR tenors for legacy contracts only, except for in cleared derivatives. Therefore, the FCA urges all market participants to move over their remaining contracts referencing US dollar LIBOR settings to alternative reference rates. Additionally, the FCA reminds market participants of the wind-down of the 3-month synthetic sterling LIBOR setting on March 31, 2024.
Finally, the regulator remarks that it will soon issue an official feedback statement to its above noted consultation.