UK Government Proposes Increased Powers For The FCA Over The LIBOR Wind-Down Process

I. UK Proposal

On 23 June 2020, the UK government announced its intent to enact legislation to amend the UK regulatory framework applicable to critical benchmarks, including LIBOR.¹ The proposed amendments would give the UK Financial Conduct Authority (the "FCA") additional powers in circumstances where LIBOR ceases to be representative of the market it seeks to measure and will not be restored to representativeness. The UK government has recognized that this scenario may occur in the lead-up to the cessation of the LIBOR rate (scheduled for the end of 2021), as panel banks will no longer be compelled to take part in the LIBOR calculation process.

In May of this year, a taskforce of the Bank of England (the "Taskforce") published a paper on issues related to certain existing contracts, known as "tough legacy" contracts, considered to be those that cannot "realistically" be amended or renegotiated to refer to an alternative reference rate.² The Taskforce