Key resources for firms transitioning from LIBOR

Educational guides and resources that were produced to support firms in transitioning from LIBOR to SONIA in sterling markets.

What is LIBOR?

LIBOR was 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 has been phased out. Historically it has determined interest rates for financial contracts around the world, worth trillions of pounds.

LIBOR was 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 did firms need to transition from LIBOR?

Since the global financial crisis in 2008-09, activity in the markets that LIBOR measured reduced. The low volume of underlying transactions meant that LIBOR was 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 US dollar LIBOR settings continued on a synthetic basis in line with FCA announcements and ceased at end-September 2024.