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 Bill 2019-21 (the “Financial Services Bill”) which grants new powers under to the Financial Conduct Authority (“FCA”) to help it manage an orderly “wind-down of critical benchmarks”.
The FCA has now published a Consultation setting out the factors that it proposes to take into account when determining whether and how it would exercise these powers. The FMLC has submitted a response drawing attention to legal uncertainties which may arise in this context. In particular, the FMLC has commented on uncertainties in respect of the circumscription of the term “tough legacy” and on the interaction of these powers with steps being taken by authorities around the world.
Available as: PDF.