On 4 December 2020, following discussions with the UK Financial Conduct Authority (FCA) and other official sector bodies, the ICE Benchmark Administration (IBA), the administrator of LIBOR, published a consultation on its intention to cease publication of LIBOR settings either on 31 December 2021 or 30 June 2023, depending on the LIBOR setting. The IBA consulted on these intended cessation dates because a majority of LIBOR panel banks had communicated to the IBA that they would not be willing to continue contributing to the relevant LIBOR settings after such dates. As a result, the IBA considered that it would be unable to publish the relevant LIBOR settings on a representative basis after such dates.
On 5 March 2021, the IBA published a feedback statement on its consultation on potential cessation of LIBOR. In that feedback statement, the IBA stated that it shared and discussed the feedback from the consultation with the FCA. In the absence of sufficient panel bank support, and without the intervention of the FCA to compel continued panel bank contributions to LIBOR, the IBA stated that it is not possible for the IBA to publish the relevant LIBOR settings on a representative basis beyond the intended cessation dates for such settings.
As a result of the IBA not having access to input data necessary to calculate LIBOR settings on a representative basis beyond the intended cessation dates set forth in the table below, the IBA stated that it has to cease publication of the following LIBOR settings immediately after the publication of LIBOR on the below dates. Unless the FCA exercises its proposed new powers which are included in the current Financial Services Bill as proposed amendments to the UK Benchmarks Regulation (BMR) to require the IBA to continue publishing these LIBOR settings using a changed methodology (also known as a “synthetic” basis).
The IBA also stated that the FCA had advised the IBA that it has no intention of using its proposed new powers to require the IBA to continue the publication of any EUR or CHF LIBOR settings, or the Overnight/Spot Next, 1 Week, 2 Month and 12 Month LIBOR settings in any other currency, beyond the above intended cessation dates for such settings. The IBA’s statement also said the FCA will consult on using these proposed new powers to require the IBA to continue the publication on a “synthetic” basis of the 1 Month, 3 Month and 6 Month GBP and JPY LIBOR settings beyond such dates, and will continue to consider the case for using these proposed powers in respect of the 1 Month, 3 Month and 6 Month USD LIBOR settings.
This was confirmed by a public announcement by the FCA on 5 March 2021, which also stated that where the FCA decides to require the IBA to continue the publication of any settings on a synthetic basis, LIBOR settings published on this synthetic basis will no longer be representative of the underlying market and economic reality the setting is intended to measure as those terms are used in the BMR.
The FCA further confirmed that it follows that all 35 LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after the dates set out above.
The IBA’s public statement is available here.
The FCA’s public statement is available here.
For the purposes of this notice, the IBA and FCA’s public statements of the 5 March 2020 are together referred to as the “Statements”.
You may be a party to a loan agreement or the holder of a note which references a LIBOR rate where CommBank may be the sole lender or issuer or, in the case of a syndicated facility, where CommBank may be the administrative agent. If the terms of that loan agreement or note require notice of the Statements to be given to you from us as lender, issuer or administrative agent, this notification constitutes such notice.
If you are party to a loan agreement or the holder of a note where the interest is calculated against a discontinuing LIBOR benchmark for one or more of the currencies and tenors set forth above, please take notice that the ability to select LIBOR as a rate for these LIBOR currencies and/or tenors may no longer be available after the relevant date set forth above. If you are a borrower under a loan agreement providing for interest to be determined by reference to a LIBOR tenor for these currencies or settings that matures after these dates, we may need to discuss transitioning to a new rate and, if so, we will be in touch with you to discuss transition prior to the cessation date of LIBOR for that currency.
We encourage you to do your own due diligence regarding your LIBOR exposure and to ensure that any additional LIBOR exposure is carefully justified. You should consider areas in your business that are impacted, including systems, documentation, risk management and accounting. Even if you have no balance sheet exposure to LIBOR, you may still be exposed to other risks in connection with LIBOR cessation or LIBOR becoming non-representative including operational, legal and financial challenges. For example, you may need to change your pricing and valuation systems if a LIBOR rate is a key input.
Additionally we encourage you to seek independent advice regarding any legal, commercial or regulatory implications which LIBOR cessation or LIBOR becoming non-representative may have on your financial arrangements or which may arise through implementing different transition options. Please also refer to your relevant authorities and independent advisors in relation to any accounting and tax implications of transition. These requirements may apply to you and us differently in different jurisdictions.
Additionally, if you plan to enter into any new LIBOR-referencing derivatives transactions maturing past 31 December 2021, please read the important disclosure here.
As nothing in this document should be taken to be advice, we encourage you to seek independent advice on these matters and you should reach your own conclusions and decisions, in consultation with your own advisors.
The information in this document might change and we are not undertaking to update it.
This information is published solely for information purposes and is not to be construed as a solicitation, an offer or recommendation by the Commonwealth Bank of Australia. The information may be incomplete or not up to date and may contain errors and omissions. It must not be relied upon as financial product advice and is not investment research. As this information has been prepared without considering your objectives, financial situation or needs, before acting on the information you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. We believe that this information is correct at the time of publishing and any opinions, conclusions or recommendations are reasonably held based on the information available at the time of its compilation but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made.