In July 2017, the FCA announced that it would not guarantee the survival of the London Inter-Bank Offered Rate (“LIBOR“) after the end of 2021. While market participants have begun the process of moving their contracts away from LIBOR to successor rates, there remain so-called “tough legacy” contracts which it is not possible to transition to a new benchmark. To facilitate the transition of these “tough legacy” contracts, HM Government has introduced the Financial Services Act which grants new powers under to the Financial Conduct Authority (“FCA”) to help it manage an orderly “wind-down of critical benchmarks”.
The FMLC has written extensively about issues of legal uncertainty arising in the context of LIBOR transition and has commented previously on steps taken by UK authorities to help the market transition away from LIBOR. In this response to the FCA’s Consultation on its new powers over the use of critical benchmarks, the FMLC has highlighted uncertainties in relation to the BMR generally, which in turn lead to confusion regarding the new powers and the difficulties in defining the “tough legacy” contracts in relation to which the FCA may use its new powers. In relation to the latter, in particular, the FMLC would urge the FCA to adopt a generous approach to the definition of “tough legacy”.
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