Key resources for firms transitioning from LIBOR

What is LIBOR?

LIBOR is an interest rate based on the rates at which banks lend to each other. LIBOR was one of the main interest rate benchmarks used in financial markets, but it is being phased out. Historically it has determined interest rates for financial contracts around the world, worth trillions of pounds.

LIBOR has been commonly referenced in both financial contracts, such as loans or deposit facilities, and non-financial contracts such as commercial leasing contracts and the discount rate for valuations.

Why do firms need to transition from LIBOR?

Since the global financial crisis in 2008-09, activity in the markets that LIBOR measures has reduced. The low volume of underlying transactions meant that LIBOR is no longer sustainable. There are other more robust rates, including the Sterling Overnight Index Average (SONIA) benchmark, which the Bank of England produces.

In line with announcements from the Financial Conduct Authority (FCA), publication of 24 of the 35 LIBOR settings ceased from 1 January 2022. In line with further announcements from the FCA, three yen LIBOR settings continued for the duration of 2022 on a ‘synthetic’ basis, 1- and 6-month sterling LIBOR continued on a synthetic basis until end-March 2023 and 3-month sterling LIBOR continued on a synthetic basis until end-March 2024. After end-June 2023, panel-bank US dollar LIBOR ceased. The 1-, 3- and 6-month settings will continue on a synthetic basis in line with FCA announcements. These synthetic US dollar LIBOR settings are planned to cease at end-September 2024.

What does my firm need to do now?

It is important that your firm continues active transition to move its legacy sterling LIBOR contracts that currently reference temporary synthetic LIBOR to permanent robust alternative rates (such as SONIA). Find out more on next steps in LIBOR transition in this joint statement between the Bank of England, Financial Conduct Authority, and the Working Group on Sterling Risk-Free Reference Rates.

Market participants continue to work with the Bank of England and Financial Conduct Authority to support transition of any remaining LIBOR-linked contracts.

The Working Group on Sterling Risk-Free Reference Rates leads this work in UK markets, with support from the Bank of England and the Financial Conduct Authority.

It has held a number of webinars, and publishes guidance and support for both financial and non-financial firms to help them with the transition.

You can find out more about the Working Group’s remit and objectives in its Terms of Reference.