Due to changing industry norms, the number of actual transactions upon which LIBOR is based has decreased significantly. The underlying market that LIBOR is derived from is no longer used in any significant volume and the ongoing slowdown in unsecured bank debt market activity has further diluted LIBOR’s relevance. Therefore, the submissions made by banks to sustain the LIBOR rate are often based (at least in part) on expert judgement rather than actual transactions.
The FCA has concluded that the way in which LIBOR is calculated in practice means that it no longer complies with internationally accepted principles for robust interest rate benchmarks. As such, in 2017, the FCA announced its intention to stop compelling banks to submit the rates required to calculate LIBOR after the end of 2021, and has announced its support of the IBA’s recently announced market consultation regarding the extension of US dollar LIBOR tenors through June 30, 2023 (with the exception of the little used one-week and two-month tenors, which are still proposed to cease publication on December 31, 2021).