LIBOR and reference rate reform

Latest updates on LIBOR reform

UK’s Financial Conduct Authority (FCA) announced that the last US dollar LIBOR panel has ceased on 30 June 2023. Its end has marked another critical milestone in the transition away from LIBOR.

FCA issued a consultation in November 2022 on a synthetic US dollar LIBOR, and it confirmed in its Feedback Statement published on 31 May 2023 that it requires LIBOR’s administrator, ICE Benchmark Administration Limited (IBA), to publish the 1-, 3-, and 6-month US dollar LIBOR settings using a synthetic methodology for a temporary period until end-September 2024.
The overnight and 12-month-US dollar LIBOR settings ceased after final publication on 30 June 2023.
The 1-, 3-, and 6-month US dollar LIBOR settings will be published in synthetic form from 3 July 2023 until end-September 2024, for use in legacy contracts only. They will be calculated using a synthetic methodology based on the relevant CME Term Secured Overnight Financing Rate (SOFR) plus the respective ISDA fixed spread adjustment.
All new use of these remaining US dollar LIBOR settings will be prohibited.

_{Source: FCA as of 3 July 2023}

Preparations in Hong Kong

Hong Kong Monetary Authority: Circular on reform of interest rate benchmarks

On 14 April 2023, the Hong Kong Monetary Authority (HKMA) issued a circular to share with the industry a leaflet and a set of questions and answers jointly developed by the HKMA and the Treasury Markets Association to remind corporate customers of banks to make timely preparation for transitioning away from the remaining LIBOR settings.
Institutions are recommended to distribute the enclosed leaflet to their corporate customers with outstanding LIBOR-linked contracts with them.

Important points to note for corporate treasurers

The remaining US dollar LIBOR settings were discontinued on 1 July 2023.
SOFR has replaced US dollar LIBOR as its alternative reference rate.
To ensure a smooth transition away from LIBOR, corporate treasurers are reminded to take prompt action to complete the remediation of existing contracts referencing the remaining US dollar LIBOR settings in good time.

_{Source: HKMA as of 26 Jun 2023}