ARTICLE · 20 OCTOBER 2021

With LIBOR Soon Ending – What Options Are Available To South Africans When Selecting An Alternative Reference Rate

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The London Interbank Offered Rate ("LIBOR") will soon begin its long good-bye.

South AfricaFinance and Banking

Deborah Carmichael

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The London Interbank Offered Rate ("LIBOR") will soon begin its long good-bye. The currencies for which LIBOR will initially be phased out include GBP and JPY. In this regard the Financial Conduct Authority ("FCA") in the UK has already issued a press release in which it confirmed that, to avoid disruption to legacy contracts that reference the one, three and six month GBP and JPY LIBOR settings, it will require the LIBOR benchmark administrator to publish these settings under a "synthetic" methodology, based on term risk-free rates, for the duration of 2022. These six LIBOR settings will be available only for use in some legacy contracts, and are not for use in new business.

The question on most lips in South Africa, however, is what options are available to market participants in place of USD LIBOR and do we really have to use that backward looking rate. Two things are true:

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