The UK's Financial Conduct Authority (FCA ) proposed the publication of 'synthetic' LIBOR settings of the US dollar until the end of September 2024. Announced on Wednesday, the UK financial watchdog is promising to allow the publication of 1, 3 and 6 months synthetic LIBOR settings for the US dollar.

The latest announcement of the FCA indicates that the proposed schedule to end all publications of LIBOR is at the end of September 2024.

The FCA, which oversees LIBOR, scraped the usage of the controversial LIBOR rates in 2021. Though the publication of most of the LIBOR rates for foreign currencies ceased on 31 December 2021, only some US dollar settings will continue until 30 June 2023.

The US dollar synthetic LIBOR proposal came in line with the regulatory estimate of $70 trillion of outstanding dollar Libor exposures beyond June 2023. The FCA has specified that synthetic rates are not for use in new contracts but are "intended for use in certain legacy contracts only."

A Temporary Measure

The regulator came up with the 'synthetic' LIBOR settings last year in November as a temporary measure. Initially allowed only for sterling and yen, the synthetic LIBOR settings are calculated using a forward-looking term version of the relevant risk-free rates: SONIA for sterling and TONA for yen.

The three synthetic yen LIBOR settings will cease at the end of 2022, while the one and six-month synthetic sterling LIBOR settings will cease in March 2023. The 3-month setting for synthetic sterling LIBOR will be allowed until March 2024

"Any synthetic LIBOR settings are only a bridge to appropriate alternative risk-free rates, not a permanent solution. As such, market participants should continue to prioritize active transition and focus on converting their legacy contracts to risk-free rates as soon as possible," the regulator stated.

The London Interbank Offered Rate (LIBOR) was once the most important number in the financial services industry. It measures the cost of unsecured borrowing between banks. However, the reputation of LIBOR was tainted by the manipulation of its rates by several banks. Many traders were charged and penalized for their role in this mass Forex market rigging.

The UK's Financial Conduct Authority (FCA ) proposed the publication of 'synthetic' LIBOR settings of the US dollar until the end of September 2024. Announced on Wednesday, the UK financial watchdog is promising to allow the publication of 1, 3 and 6 months synthetic LIBOR settings for the US dollar.

The latest announcement of the FCA indicates that the proposed schedule to end all publications of LIBOR is at the end of September 2024.

The FCA, which oversees LIBOR, scraped the usage of the controversial LIBOR rates in 2021. Though the publication of most of the LIBOR rates for foreign currencies ceased on 31 December 2021, only some US dollar settings will continue until 30 June 2023.

The US dollar synthetic LIBOR proposal came in line with the regulatory estimate of $70 trillion of outstanding dollar Libor exposures beyond June 2023. The FCA has specified that synthetic rates are not for use in new contracts but are "intended for use in certain legacy contracts only."

A Temporary Measure

The regulator came up with the 'synthetic' LIBOR settings last year in November as a temporary measure. Initially allowed only for sterling and yen, the synthetic LIBOR settings are calculated using a forward-looking term version of the relevant risk-free rates: SONIA for sterling and TONA for yen.

The three synthetic yen LIBOR settings will cease at the end of 2022, while the one and six-month synthetic sterling LIBOR settings will cease in March 2023. The 3-month setting for synthetic sterling LIBOR will be allowed until March 2024

"Any synthetic LIBOR settings are only a bridge to appropriate alternative risk-free rates, not a permanent solution. As such, market participants should continue to prioritize active transition and focus on converting their legacy contracts to risk-free rates as soon as possible," the regulator stated.

The London Interbank Offered Rate (LIBOR) was once the most important number in the financial services industry. It measures the cost of unsecured borrowing between banks. However, the reputation of LIBOR was tainted by the manipulation of its rates by several banks. Many traders were charged and penalized for their role in this mass Forex market rigging.