The interest rate benchmark LIBOR is being wound down and the UK Financial Conduct Authority has announced how it will use its powers under the UK Benchmarks Regulation to aid the orderly wind-down of sterling- and yen-linked “tough legacy contracts.”
Continue Reading FCA confirms rules for legacy use of synthetic LIBOR rates and no new use of US dollar LIBOR
The UK Government passed the Financial Services Act 2021 (the “FS Act 2021”) on 29 April 2021, which amended the UK Benchmarks Regulation ((EU) 2016/1011) (the “UK BMR”), to provide the UK Financial Conduct Authority (the “FCA“) with new and enhanced powers to oversee the orderly wind-down of critical benchmarks. In particular, the legislation addresses the risk that LIBOR cessation poses to “tough legacy contracts” (i.e., contracts that genuinely have no or inadequate fallback rate alternatives and no realistic ability to be renegotiated or amended). The Critical Benchmarks (References and Administrators’ Liability) Bill (the “Bill”) has been drafted to address these risks.
Continue Reading The Critical Benchmarks (References and Administrators’ Liability) Bill receives its first reading in the House of Lords
On 29 April 2021, the Financial Services Act 2021 (“the Act”) received Royal Assent and became law in the United Kingdom. The Act introduced reforms to a number of key UK financial services frameworks, which also represent the first major changes to the UK regulatory landscape following the UK’s departure from the European Union on 31 December 2020. One area of reform includes amendments to the UK Benchmarks Regulation (“UK BMR”).
Continue Reading Legislative solutions to tough legacy contracts are passed into UK law
The Benchmark Regulation (“BMR”) came into force in 2016 and applies since 1 January 2018. It aims to regulate benchmarks, including interest rate benchmarks such as London Interbank Offered Rate (“LIBOR”), used in the EU in order to make such benchmarks more reliable. For this purpose, the Benchmark Regulation introduced licensing and registration requirements but also obligations for users of benchmarks to deal with, and provide for plans in case of, interruptions or cessations of benchmarks. The BMR, however, does not give supervising authorities the right to directly amend financial instruments or contracts if the parties to it are unable to replace a benchmark for whatever reason. So any of these plans are subject to civil law requirements and restrictions applicable to a financial instrument or contract under its governing law.
Continue Reading Proposal for a Governmental IBOR Transition in the European Union