In a move poised to effect significant change in the landscape of international finance, the USD LIBOR (London Interbank Offered Rate) panel has ceased publishing its one-, three-, and six-month USD LIBOR settings. This news follows the official prediction made by the Financial Conduct Authority (FCA) on 3 April 2023. The ICE Benchmark Administration (IBA), however, has begun to publish non-representative “synthetic USD LIBOR” rates for these settings using a different methodology.
The novel approach is grounded in the Term SOFR (Secured Overnight Financing Rate) distributed by the Chicago Mercantile Exchange, also known as the “CME Terms SOFR”. This comes coupled with an adjustment for the corresponding spread. This synthesis of methods has led to the creation of a system that promises to maintain viability despite the disappearance of the previous USD LIBOR structure.
For the sources of this development, please refer to this post on JD Supra, which includes detailed annotations and guidance provided by Shearman & Sterling LLP. As the impacts of these changes evolve, professionals throughout international business and finance sectors will need to closely follow the implications and adjust their strategies accordingly.