On November 30, 2020, ICE Benchmark Administration (IBA), the administrator of LIBOR, announced that it expects to consult, in early December 2020, on its intention to cease the publication of:

This announcement was made in response to feedback and information received from panel banks and official sector bodies, and follows the IBA's announcement on November 18, 2020, that the IBA will consult on its intention to cease the publication of all GBP, EUR, CHF, and JPY LIBOR settings immediately following the LIBOR publication on December 31, 2021 (see Legal Update, ISDA® Response to IBA and FCA Announcements on LIBOR Consultations).

IBA also clarified that the press release is not an announcement that IBA will continue or cease the publication of any LIBOR settings after the LIBOR publication on the December 31, 2021 and June 30, 2023 dates. IBA expects to make separate announcements in this regard following the outcome of the consultation, and subject to any rights of the FCA to compel IBA to continue publication.

In response, the Board of Governors of the Federal Reserve System (FRB), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the US agencies) issued a statement with guidance that encourages banks to transition away from reference rate US dollar LIBOR as soon as possible. The US agencies recognize that the extension of the publication of certain USD LIBOR settings until June 2023 will allow most legacy USD LIBOR contracts to mature before LIBOR experiences disruptions. However, the US agencies caution against entering into new contracts that use USD LIBOR as a reference rate after December 31, 2021, and encourage market participants to cease entering into contracts referencing USD LIBOR as soon as possible. New contracts entered into before December 31, 2021 should either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR's discontinuation.

The Financial Conduct Authority (FCA) also issued a statement welcoming the end of USD LIBOR and stating that it plans to coordinate with US authorities and relevant authorities in other jurisdictions to consider whether, and how, to limit new use of USD LIBOR to protect consumers and market integrity. The FCA states that it may utilize new powers introduced by the October 2020 Financial Services Bill to prohibit some or all use of USD LIBOR. The FCA also encourages market participants that are parties to legacy LIBOR contracts to continue work to convert those contracts or adopt robust fallbacks.

ISDA® issued a statement in response to the statements from IBA, FCA, and the FRB clarifying that these statements do not "constitute an index cessation event under the IBOR Fallbacks Supplement or the ISDA 2020 IBOR Fallbacks Protocol" and therefore do not trigger the fallbacks under the supplement, protocol or under the 2018 ISDA Benchmarks Supplement or its protocol, or have any effect on the calculation of the spread.

The Alternative Reference Rates Committee (ARRC) issued a statement applauding the milestone in the transition from USD LIBOR. ARRC believes that the development aligns with the ARRC's transition efforts, and will accelerate market participants' use of the Secured Overnight Financing Rate (SOFR), ARRC's preferred alternative to USD LIBOR.

For further information on LIBOR replacement and benchmark fallback, see LIBOR Replacement Toolkit.

"ISDA" is a registered trademark of the International Swaps and Derivatives Association, Inc. (ISDA). ISDA is not a sponsor of Practical Law and had no part in the development of this Legal update.