On November 30, 2020, Intercontinental Exchange, Inc. (ICE) announced that the ICE Benchmark Administration Limited (IBA), a wholly-owned subsidiary of ICE and the administrator of LIBOR, will consult in early December 2020 on its intention to (i) cease the publication of the one-week and two-month USD LIBOR after December 31, 2021, and (ii) cease the publication of all other tenors of USD LIBOR after June 30, 2023. This follows the announcement on November 18, 2020, that the IBA would consult on its intention to cease the publication of all tenors of GBP, EUR, CHF and JPY LIBOR after December 31, 2021. The IBA expects to close the consultations for feedback by the end of January 2021.
The UK’s Financial Conduct Authority (FCA), who regulates the IBA and who announced in July of 2017 that it would no longer require panel banks to submit information to the IBA for the calculation of LIBOR after December 31, 2021, provided its support with a concurrent announcement welcoming the extension by the IBA and the panel banks.
Although not regulators of the IBA, each of the Federal Reserve Board, the Alternative Reference Rates Committee and the International Swaps and Derivatives Association also issued concurrent statements applauding the IBA’s announcement. “Today's plan ensures that the transition away from LIBOR will be orderly and fair for everyone—market participants, businesses, and consumers,” said Vice Chair for Supervision and Chair of the Financial Stability Board Randal K. Quarles
Despite this potential extension of the US LIBOR transition deadline, US regulators continue to urge financial institutions to stop entering into new LIBOR transactions by the end of 2021. “New contracts entered into before December 31, 2021 should either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation,” wrote the Federal Board of Governors in today’s joint statement with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. “These actions are necessary to facilitate an orderly — and safe and sound — LIBOR transition.”
For market participants who have entered into contracts with hardwire fallback language, it should be noted that today’s announcement expressly stated that it is not, and must not be taken to be, an announcement that the IBA will continue or cease the publication of any LIBOR tenor after December 31, 2021, or June 30, 2023. Finally, the announcement noted that, regardless of the outcome of the consultation, (i) any publication of LIBOR beyond December 31, 2021, will need to comply with applicable regulations (such as representativeness), and (ii) the IBA will remain subject to any right of the FCA to compel the IBA to continue publication of LIBOR.
Sources:
Intercontinental Exchange – ICE Benchmark Administration to Consult on Its Intention to Cease the Publication of One Week and Two Month USD LIBOR Settings at End-December 2021, and the Remaining USD LIBOR Settings at End June 2023
Intercontinental Exchange – ICE Benchmark Administration to Consult On Its Intention to Cease the Publication of GBP, EUR, CHF and JPY LIBOR
Federal Reserve – Statement on LIBOR Transition
UK Financial Conduct Authority – FCA response to IBA’s proposed consultation on intention to cease US$ LIBOR
Alternative Reference Rates Committee – ARRC Applauds Major Milestone in Transition from US Dollar LIBOR
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