FCA Consults On Use Of New LIBOR Transition Powers

On May 20, 2021, the UK Financial Conduct Authority (FCA) published a consultation on its proposed policy framework for exercising two of its new powers under the Benchmarks Regulation, as introduced by the UK Financial Services Act 2021 (UK BMR). These powers are designed to facilitate an orderly wind down of critical benchmarks such as LIBOR, and were discussed in more detail in our earlier blog post.

Under the UK BMR, the FCA will have new powers to compel the continued publication of LIBOR using a changed methodology (a Synthetic LIBOR). When a Synthetic LIBOR rate is implemented, the FCA will only permit its use in 'tough legacy' contracts, where amendment of the contract is not possible. On March 5, 2021, the FCA released its framework policy for how it will exercise its new powers to require continued publication of critical benchmarks using a changed methodology. This new consultation sets out which factors the FCA deems relevant in deciding what legacy use