On 5 March 2021, the Financial Conduct Authority announced that most LIBOR (London Inter-Bank Offered Rate) panels would cease after 31 December 2021. LIBOR panel banks submit estimated rates at which they expect it would cost to access funds in specific tenors (i.e lengths of time before the funds would need to be repaid), which are directly correlated to how the LIBOR rate is quoted, for example a six month LIBOR or 12 month LIBOR. These submissions would then be used to calculate the LIBOR rate for each tenor.
As most of these panels ceased on 31 December 2021 the publication of most LIBOR benchmark rates has ceased (apart from some interim rates currently in place). As the LIBOR rate appears in a number of our utility licenses, we are publishing a regulatory letter for licence holders to provide details of our decision on the replacement rate we will now use.
We selected the Bank of England base rate as this was the most appropriate, accessible and straightforward replacement for Libor. Additionally we are confident in the longevity of the Bank of England base rate and as local bank base rates already appear in some licences, this will provide a more consistent approach across the organisation.
Consultation on licence modifications aligning with this intention will follow as part of other planned work. We look forward to engaging with stakeholders during this transition from LIBOR to the Bank of England base rate.