Globally, financial benchmarks are being reformed. In many jurisdictions, Risk-Free Rates (RFRs) are replacing certain Interbank Offered Rates (IBORs) — including the London Interbank Offered Rate (LIBOR). In other jurisdictions, reformed IBORs continue to exist alongside the new RFRs.
On 5 March 2021 various industry and regulatory bodies made key statements on the future cessation of certain IBORs. In particular the UK Financial Conduct Authority (FCA) noted that all 35 LIBOR tenors would either permanently cease, or continue in an unrepresentative manner. These changes will occur on the following dates:
31 December 2021
- All GBP, EUR, CHF and JPY LIBOR settings
- USD LIBOR one week and two month settings
30 June 2023
- USD LIBOR overnight and one, three, six and 12 month settings
The FCA also noted that the one, three and six month LIBOR settings would continue for GBP, USD and JPY after these dates on a synthetic basis. Use of these synthetic LIBORs will be limited to a set of tough legacy transactions, where other viable alternatives are not available. It is not yet clear which of these will qualify as tough legacy transactions.
It's important that you consider how benchmark reforms could impact any products you hold or may acquire. As well as any transactions that you have or may enter into with us (or any of our group companies) where such a product or transaction references an impacted IBOR.
Impacted IBORs may be subject to methodological or other changes, which could modify the value of the IBOR. In some instances, they could cease to exist (in the event of the LIBOR). In other cases, the IBORs may not be reformed enough — meaning they can no longer be used in certain jurisdictions (for example under the European Union Benchmark Regulation).
These consequences will impact products and transactions that you may hold or enter into with us or any of our group companies.