FCA Confirms Availability of Synthetic USD LIBOR Until October 2024
03 April 2023
03 April 2023
The FCA has confirmed that one-month, three-month and six-month US dollar LIBOR will be made available on a synthetic basis for fifteen months after the rate's official discontinuation on 30 June 2023.
As proposed in the FCA's November 2022 consultation, in the absence "unforeseen and material events" the FCA intends to require ICE Benchmark Administration to publish synthetic US dollar LIBOR until 30 September 2024. The synthetic rate will be calculated as CME Term SOFR for the relevant tenor plus the applicable ISDA spread. This will be available for use in all legacy contracts except for cleared derivatives.
The one-month, three-month and six-month US dollar LIBOR tenors will be officially designated "Article 23A benchmarks" under the UK Benchmarks Regulation (UK BMR) from 1 July 2023, meaning that from such date they will no longer be representative. Accordingly, after 30 June 2023 all non-transitioned English law US dollar LIBOR contracts and instruments will automatically switch to synthetic US dollar LIBOR (where available) under the UK BMR. Contracting parties will not be able to argue that use of the synthetic rate constitutes breach, material change, or frustration of the contract.
Federal legislation is also in place in the US to facilitate the transition away from US dollar LIBOR. You can read more about the interaction between English law, US law and synthetic USD LIBOR in our briefing.
Synthetic US dollar LIBOR rates will not be representative and will therefore only be available for use in legacy instruments, not new instruments.
Following the discontinuation on 31 March 2023 of one-month and six-month synthetic sterling LIBOR, the confirmed discontinuation dates for the remaining LIBOR and synthetic LIBOR rates are as shown below.
RATE | DISCONTINUATION DATE |
3m synthetic sterling LIBOR | 31 March 2024 |
Overnight US dollar LIBOR | 30 June 2023 |
1m synthetic US dollar LIBOR | 30 September 2024 |
3m synthetic US dollar LIBOR | 30 September 2024 |
6m synthetic US dollar LIBOR | 30 September 2024 |
12m US dollar LIBOR | 30 June 2023 |
For more on LIBOR transition, please see our LIBOR Hub.
Authors: Mike Logie and Kirsty McAllister-Jones
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.