The UK government brought an end to Libor in 2021, but the use of ‘synthetic’ Libor to give organisations the time to transition away from the interbank lending rate was allowed to continue until the end of 2022.
However, the FCA has now concluded that some organisations need more time to make the switch, and as such has announced that the one- and six-month synthetic sterling Libor settings will continue for a further three months after the end of 2022, until 31 March 2023.
It found that some PFI loans remain linked to the six-month Libor rate, and the organisation warned: “We encourage all relevant parties to ensure these contracts are amended as a matter of priority.
“The majority of respondents to our consultation agreed that the one- and six-month synthetic sterling Libor settings could cease in an orderly fashion at end-March 2023, or were neutral,” the FCA added.
Many PFI deals had used Libor (London Interbank Offered Rate), and have slowly been transitioning to the new Sonia (Sterling Overnight Index Average) system.