The Bank of England (BoE) updates on the LIBOR Transition
The Bank of England (BoE) and Financial Conduct Authority (FCA) have reminded firms that there are less than 90 days until the USD LIBOR ceases on 30 June 2023, marking a milestone in the transition to Risk-Free Rates (RFRs).
The FCA published a notice of first decision to compel ICE Benchmark Administration Limited (IBA) to continue the publication of the 1-, 3- and 6-month US dollar LIBOR settings after June 30, 2023 until September 30, 2024, using an unrepresentative synthetic methodology. The FCA reminds firms that they must continue to actively transition contracts that reference US dollar LIBOR. The FCA has also reminded firms that the 3-month synthetic sterling LIBOR setting is expected to cease on March 28, 2024 and firms should continue their active transition efforts ahead of this date. The 1- and 6-month synthetic sterling LIBOR settings were published for the final time on March 31, 2023 and have ceased permanently. The FCA plans to publish a detailed feedback statement in Q2 2023 and to publish the final versions of the draft notices in July 2023.
The Hong Kong Monetary Authority (HKMA) has issued a leaflet and updated question and answer document to remind corporate customers of authorized institutions to prepare for the transition away from remaining LIBOR settings. The leaflet reminds corporate treasurers that the remaining USD LIBOR settings will be discontinued from July 1, 2023, and that the Secured Overnight Financing Rate (SOFR) has replaced LIBOR. To ensure a smooth transition away from LIBOR, corporate treasurers are reminded to take action to complete the remediation of existing contracts referencing the remaining USD LIBOR settings in good time, and in any event before the end of June 2023.
The Alternative Reference Rates Committee (ARRC) released a summary and update of its Term SOFR Scope of Use recommendations to provide a detailed summary and examples of the ARRC’s existing recommendations and add a limited refinement with respect to Term SOFR-SOFR basis swaps. The ARRC’s existing recommendations recognize the ability of end users to use Term SOFR derivatives to hedge Term SOFR business loans or legacy LIBOR products that have converted to Term SOFR. The ARRC’s update of its recommendations additionally recognizes the ability of end users to enter into Term SOFR-SOFR basis swaps (but not other Term SOFR derivatives) in a wider set of circumstances, even when they do not hold Term SOFR cash assets that they are seeking to hedge.
Bloomberg
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