Earlier this year, the Financial Conduct Authority (FCA) exercised its powers pursuant to Article 21(3) of the Benchmarks Regulation to compel ICE Benchmark Administration (IBA) to continue publishing 1-month, 3-month and 6-month synthetic LIBOR settings for a period of 3 months after the US dollar LIBOR bank panel ended on June 28, 2024. This decision was made by FCA in order to provide market participants with an orderly transition away from US LIBOR, however, the FCA noted that synthetic LIBOR settings were permanently unrepresentative of the underlying markets they previously sought to measure.1
Accordingly, on September 30, 2024, the IBA will cease publishing such synthetic LIBOR settings. The FCA previously made clear that the compulsion period shall immediately end after the IBA’s final publication on September 30, 2024, and that the FCA has no intention to use its powers to compel the IBA to continue to publish synthetic LIBOR settings beyond such date.2
Borrowers and lenders should review their governing transaction documents to confirm whether interest rates in any applicable facilities are tied to synthetic LIBOR settings. Market participants who currently have agreements with interest rates tied to synthetic LIBOR settings should take steps contemplated by their governing transaction documents to initiate applicable benchmark conforming changes. Borrowers, lenders and agents should work collaboratively to ensure an orderly transition from synthetic US Libor to any applicable new benchmark prior to September 30th.
