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 and 1- and 6-month sterling LIBOR continued on a synthetic basis until end-March 2023. These settings have now ceased. 3-month sterling LIBOR will continue 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.