LIBOR: Q1 2021 Snapshot


On 5 March 2021, the Financial Conduct Authority (FCA) set out certain key dates for the cessation of all 35 London Inter-Bank Offered Rate (LIBOR) settings published by ICE Benchmark Administration. Whilst there has been some movement in the timetables for LIBOR transitioning (most likely as a result of the continued global pandemic), market participants should be aware that the move away from LIBOR is now very real and the deadlines set out below are unlikely to change.

This alert follows our previous note, “LIBOR: Snapshot of Latest Developments,” featured in our International News publication, Issue 3 2020.

In Depth

As per the guidance released by the FCA (and reported on by the Loan Market Association (LMA):

  1. By 31 March 2021, new sterling loans expiring after the end of 2021 should not reference LIBOR but instead an alternative rate.
  2. By 31 December 2021, all seven euro LIBOR settings; all seven Swiss franc LIBOR settings; the Spot Next, one-week, two-month and 12-month Japanese yen LIBOR settings; the overnight, one-week, two-month and 12-month sterling LIBOR settings; and the one-week and two-month US dollar LIBOR settings will cease.
  3. By 30 June 2023, the overnight and 12-month US dollar LIBOR settings will cease.

Notwithstanding the guidance set out above, the FCA will potentially have powers, through the Financial Services Bill (currently at the House of Lords committee stage), to permit a synthetic LIBOR based on new methodology to continue to be used for legacy contracts.

The LMA has published exposure drafts covering the following:

  • Compounded SONIA based sterling term and revolving facilities agreement
  • Multicurrency compounded rate/term rate facilities agreement (lookback without and with observation shift)
  • Multicurrency compounded rate/term rate facilities agreement (lookback without observation shift).

The LMA has also posted a webinar, “An introduction to the LMA Exposure Drafts of Multicurrency Compounded Rate/Term Rate Facilities Agreements – On Demands”. Market participants should become familiar with these drafts.

The revised deadlines are unlikely to change further, and as a result we are likely to see a large number of amendment requests throughout 2021 to ensure compliance with the applicable deadlines.