FCA launches consultation on ‘synthetic’ US dollar LIBOR

In June 2022, FCA’s consultation CP22/11 sought information on US dollar LIBOR exposures. Having considered these in its latest consultation, FCA considers that there is a case for:

  • requiring publication of the 1, 3 and 6 month synthetic US dollar LIBOR settings for a short period of time, ie until end‑September 2024;
  • using CME Term SOFR plus the relevant ISDA fixed spread adjustment as the methodology for these synthetic US dollar LIBOR settings; and
  • permitting use of these synthetic US dollar LIBOR settings in all contracts except cleared derivatives.

FCA is seeking views on its proposal to require the 1, 3 and 6 month US dollar LIBOR settings to be published on a synthetic basis until end‑September 2024. FCA also seeks feedback on the proposed methodology for building these synthetic US dollar LIBOR settings, and what use of them should be allowed.

Consultees must respond by 6 January 2023 and can respond via FCA’s online form.

By way of reminder, FCA had previously confirmed that 1 and 6 month sterling LIBOR will cease at end‑March 2023; and that 3 month sterling LIBOR will continue to be published until end‑March 2024, after which it will also cease permanently. Synthetic yen LIBOR settings will cease at end‑2022.

Harshil Patel