HM Treasury notified that, after considering all responses, the government intends to bring forward further legislation, when the Parliamentary time allows, to address issues identified in the consultation on supporting the wind-down of critical benchmarks. The legislation will seek to reduce disruption that might arise from LIBOR transition with regard to the potential risk of contractual uncertainty and disputes in respect of contracts that have been unable to transition from LIBOR to another benchmark (tough legacy contracts), where FCA has exercised the powers given to it in the Financial Services Act.
The regulator received 32 responses to the consultation on supporting the wind-down of critical benchmarks, which ran from February 15, 2021 to March 15, 2021. The consultation invited responses on the case for additional legal protections for parties affected by the wind-down of a critical benchmark. Through the consultation, HM Treasury had intended to understand the extent to which there is uncertainty over the continued application of a critical benchmark to contracts where FCA has exercised its power to direct a change in how the benchmark is determined under the Benchmarks Regulation and the risk of associated litigation.
HM Treasury has also published its reply to the Working Group on Sterling Risk Free Reference Rates on provisions to support the wind-down of critical benchmarks. HM Treasury believes that, wherever possible, parties should seek to transition contracts away from LIBOR ahead of the end of the 2021 and the government, FCA, and BoE will continue to work closely to encourage market-led transition from LIBOR and to monitor progress.
Keywords: Europe, UK, Banking, Securities, Critical Benchmarks, Interest Rate Benchmark, LIBOR, Benchmarks Regulation, Legacy Contracts, Benchmark Reforms, FCA, HM Treasury
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