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    FCA Issues Final Publications on LIBOR Before End of 2021

    December 10, 2021

    The Financial Conduct Authority published a feedback statement (FS21/12) on responses to its proposal to use the Article 23C and Article 21A powers under the Benchmarks Regulation, or BMR, for certain LIBOR settings. FS21/12 will interest users of the six LIBOR settings (the one-, three-, and six-month sterling and JPY LIBOR settings) that will move to a synthetic methodology from January 01, 2022 as well as the users of the continuing USD LIBOR settings whether these users are regulated or unregulated. FCA also published a technical Notice to ensure that the decision to allow legacy use of the synthetic sterling and JPY LIBOR settings comes into effect at the same time as the overall ban on use.

    FCA had, in September 2021, published a consultation on its decision to use these new powers under the Benchmarks Regulation. The consultation sought views on the proposed decisions on whether and how to permit legacy use of 1-, 3-, and 6-month sterling and JPY LIBOR from January 01, 2022. The consultation also sought views on proposed decisions on whether and how to prohibit new use of overnight one-, three-, six-, and twelve-month USD LIBOR. FCA received 42 responses from banks, asset managers, trade bodies, and law firms, with most respondents from the UK and some from abroad. Overall, respondents agreed with both the proposals. On November 16, 2021, following a review and consideration of responses to the consultation, FCA published a Notice setting out its decision under Article 21A, a draft Notice setting out its decision under Article 23C, and the reasons for these notices in line with the relevant requirements under the Benchmarks Regulation. FCA decided to permit all legacy use of the six synthetic LIBOR settings by supervised entities other than in cleared derivatives (whether directly or indirectly cleared); it also decided to prohibit new use of the continuing USD LIBOR settings by supervised entities, with certain exceptions. FS21/12 provides more details of the feedback FCA received and its response. FS21/12 notes that following the feedback, FCA has made one adjustment to its approach on fallbacks. FCA also added an Annex to its Notice setting out the decision to provide further detail on the exceptions to the restriction on new use. FCA will publish the final Notice under Article 23C on January 01, 2022, in line with the draft Notice published in November. 

     

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    Keywords: Europe, UK, Banking, Securities, Legacy Contracts, LIBOR, Benchmark Reforms, Benchmarks Regulation, Synthetic LIBOR, Fallbacks, Derivatives, FCA

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