On September 13, 2023, Bloomberg Index Services Limited (BISL) released a consultation that proposes the cessation of the publication of the Bloomberg Short-Term Bank Yield Index (BSBY), which has been published daily by BISL since March 2021.

As background, the consultation provides that BSBY was designed as a cost of funding benchmark for lending markets and is a "dynamic" credit sensitive rate (CSR) which reflects marginal funding costs for overnight, one-month, three-month, six-month, and 12-month tenors.

As market participants transitioned away from USD LIBOR, several successor rates were considered, including SOFR and CSRs such as BSBY and Ameribor. Panel USD LIBOR was discontinued on June 30, 2023, and the US loan market is now generally embracing Term SOFR as its replacement (see Practice Note, What's Market: SOFR Spread Adjustments and Fallback Language).

According to the consultation, BISL is seeking feedback on a proposal to cease BSBY's publication as a benchmark because BSBY's usage within financial products is limited and unlikely to see significant growth, which has resulted in insufficient usage. BISL notes that "this consultation is not a statement by the Administrator of a cessation of the benchmark, BSBY," which could trigger the use of alternative fallback rates in contracts. At least 12 months' advance written notice will be provided to market participants of BSBY's cessation.

The consultation review period closes on October 13, 2023.

For more information on BSBY, see Loan Agreement LIBOR Fallback Checklist: SOFR versus CSRs.

UPDATE: On November 15, 2023, following review of the consultation feedback, BISL announced the future permanent cessation of BSBY. The cessation will take effect on November 15, 2024.