What Now For LIBOR In Finance Documents?

Andrew Bailey, chief executive of the FCA, announced on 27 July 2017 that the FCA would no longer use its influence or legal powers to persuade or compel LIBOR panel banks to continue making LIBOR submissions after 2021. This announcement has accelerated work already underway to find alternative benchmarks. It has also focused attention on how LIBOR-based finance documents should cater for the possible demise of LIBOR.

Why the need to transition away from LIBOR?

As Andrew Bailey acknowledged in his speech, significant improvements have been made to LIBOR since April 2013. However, the underlying market that LIBOR seeks to measure – the unsecured wholesale interbank lending market – has become significantly less active, leading to questions about the sustainability of the benchmark that seeks to measure it. Panel banks are, according to Mr Bailey, "feeling discomfort" about submitting submissions based on judgements "with so little actual borrowing activity against