FCA has confirmed its new rules for:
- legacy use of synthetic LIBOR rates; and
- no new use of USD LIBOR.
It will allow temporary use of synthetic sterling and yen LIBOR rates in all legacy LIBOR contracts other than cleared derivatives, that have not been changed at or ahead of the end of 2021. They cannot be used for any new contracts. FCA is concerned at the risk of market and consumer disruption if interest payments in contracts that have not switched by year end cannot be calculated, and as a result is requiring publication of 1, 3 and 6 months LIBOR rates for sterling and yen on a synthetic basis until the end of 2022. It has already announced the calculation method.
In relation to USD LIBOR, FCA will not permit its use in most new contracts written after 31 December 2021 although 5 year USD LIBOR settings will continue to be calculated until mid-2023.