FCA unveils changes to LIBOR panels, as banks pledge support until end-2021
Societe Generale will stop submissions to the US Dollar panel and Credit Agricole Corporate and Investment Bank will halt submissions to the Japanese Yen panel.
The United Kingdom Financial Conduct Authority (FCA) has earlier today published a statement on LIBOR (London Interbank Offered Rate) panels. In brief, the panel banks have agreed to support LIBOR until the end of 2021, but there are some changes to the panels.
Today, the FCA said that there will be two amendments to individual panel compositions. Societe Generale will cease submissions to the US Dollar panel and Credit Agricole Corporate and Investment Bank will cease submissions to the Japanese Yen panel. Both banks will keep submitting to all other panels to which they contribute at present. All of the 20 panel banks have provided their support and the FCA does not expect to see any further changes to the LIBOR panels.
Andrew Bailey, FCA Chief Executive, said earlier this year that the absence of active underlying markets means that the future sustainability of LIBOR cannot be guaranteed. The support of the panels for LIBOR is needed until the end of 2021, by when a transition can be made to alternative rates.
In April this year, the Bank of England said it would promote the use of Sterling Overnight Index Average (SONIA) as an alternative to sterling LIBOR, which has been plagued by a multitude of scandals over the past few years. In the UK, the Financial Conduct Authority is overseeing the reform of Libor (including sterling Libor), whereas the Bank of England is overseeing the development of sterling RFRs.
In October, the Bank of England confirmed that its reforms to SONIA will become effective on April 23, 2018.
As a result of the reforms the Bank will be taking on the end-to-end administration, including the calculation and publication of SONIA. Also, the coverage of SONIA will be broadened to include overnight unsecured transactions negotiated bilaterally as well as those arranged via brokers, using the Bank’s Sterling Money Market Data Collection as the data source. In addition, the averaging methodology for calculating SONIA will be changed to a volume-weighted trimmed mean, and the publication of SONIA will move to 09:00 on the business day following that to which the rate pertains.
Friday – April 20, 2018 will be the final day for which SONIA will be calculated and published by the WMBA using the current methodology. For the rate pertaining to Monday 23 April, SONIA will be calculated by the Bank using the reformed methodology and published at 9am on Tuesday 24 April.
