On 27 July 2017, Andrew Bailey, Chief Executive of the UK Financial Conduct Authority, made a speech about the future of LIBOR stating that market participants should not rely on LIBOR being available after 2021. Work is progressing on the transition to alternative near risk-free reference rates in each of the LIBOR currencies. The LMA is working with the market, other trade associations and the regulators on the transition.
LIBOR Transition - counting down to end-2021
On 27 November 2020, we published an updated version of the list which sets out the near risk-free rate (RFR) referencing loans which have been announced to date. The update reflects a new section on bilateral loans containing a rate switch and details of the Seastar rate switch deal in the shipping sector which references SOFR compounded in arrear and was based on the LMA exposure draft rate switch facility. This list is based on publicly available information, or information approved by the parties for inclusion, and seeks to raise awareness of RFR referencing loans. This list is not comprehensive of all market transactions referencing RFRs.
On 23 November 2020, the Working Group on Euro Risk-Free Rates published two consultations on EURIBOR fallbacks. The two consultations cover: (i) EURIBOR fallback trigger events; and (ii) €STR-based EURIBOR fallback rates. The consultation on EURIBOR trigger events identifies a generic set of potential fallback triggers that market participants could consider including in their contracts referencing EURIBOR. The consultation on EURIBOR fallback rates analyses both backward and forward-looking rates as potential fallbacks to EURIBOR. The deadline for both consultations is 15 January 2021.
IBA to consult on intention to cease publication of GBP, EUR, CHF, and JPY LIBOR after end 2021 and FCA consults on new benchmark powers
On 18 November 2020, ICE Benchmark Administration (IBA) announced that it will consult on its intention to cease the publication after 31 December 2021 of the GBP, EUR, CHF and JPY LIBOR rates, across all tenors. In response to this announcement, the FCA published a statement and two accompanying consultations on the potential approach to the use of its proposed new powers under the Financial Services Bill to ensure the orderly wind-down of LIBOR. The deadline for both consultations is 18 January 2021.