UK Conduct Regulator Clarifies Rules on Publication of Non-Representative LIBOR

The U.K. Financial Conduct Authority has responded to a request from the International Swaps and Derivatives Association for clarification on the expected timeframes for publication of a non-representative LIBOR. The FCA (in conjunction with the Financial Stability Board) had previously requested ISDA to introduce “pre-cessation” triggers in its derivative contracts, causing LIBOR-based contracts to fall back to an alternative reference rate in the event that the FCA deemed LIBOR to no longer be representative. ISDA requested clarity about the length of the period during which such a non-representative LIBOR might be published prior to its total cessation.

The FCA does not provide a definitive timeframe for the publication of a non-representative LIBOR in its response. However, it does confirm that, under the U.K.’s onshored Benchmarks Regulation, ICE Benchmark Administration (as LIBOR administrator) must give four weeks’ notice to the FCA when it intends to cease providing LIBOR, and must not cease publication of LIBOR without the FCA’s consent for a further four weeks. The FCA also has power to compel IBA to publish LIBOR until it can be ceased in an orderly fashion, but the letter confirms that the FCA would not expect to compel IBA to continue to produce a non-representative rate. The letter also notes that the FCA is chairing a taskforce dedicated to LIBOR-referencing contracts which it is not practicable to change, but confirms the FCA’s previously stated position that it does not plan to sustain panel bank submissions to LIBOR beyond the end of 2021, even for “tough legacy” contracts such as these.

View the FCA's letter.

View details of ISDA's request for clarification.

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