FCA updates on LIBOR transition powers

On 1 January 2018 the EU Benchmark Regulation (BMR) took full effect. Following the UK’s withdrawal from the EU and the end of the transition period, the BMR has been brought into UK law (UK BMR). Under the UK BMR, FCA is responsible for:

  • authorisation and registration of UK benchmark administrators;
  • recognition of third country administrators;
  • endorsement of third country benchmarks;
  • enforcement; and
  • supervision of benchmark administrators, users, and contributors in the UK.

In its latest guidance, FCA has set out details of its enhanced powers under the Financial Services Act 2021 (FS Act).

The UK BMR defines ‘critical benchmarks’ and imposes additional regulatory requirements on the administrators of, and contributors to, these benchmarks.

Under Article 21(3) of the UK BMR, FCA has the power to require the administrator of a critical benchmark to continue publishing a critical benchmark that it otherwise intends to cease until such time as:

  • the provision of the benchmark has been transitioned to a new administrator;
  • the benchmark can be ceased to be provided in an orderly fashion; or
  • the benchmark is no longer critical.

If the FCA exercises its power under Article 21(3) of the UK BMR, FCA is required to review annually whether the exercise of that power remains necessary and the maximum period of mandatory administration has now been extended to 10 years under the FS Act.

LIBOR is currently the only critical benchmark in the UK. In November 2023, FCA  published a Notice confirming its decision that to compel the continued publication of the 3-month sterling LIBOR setting until the end of March 2024 under Article 21(3).

Harshil Patel