Category

England & Wales

Category

This blog examines the possible impact of a no-deal Brexit on foreign investors into the UK

The past month in the United Kingdom has been tumultuous, to say the least.  In the space of 30 days, the UK has seen the ascendancy of a new Prime Minister, the hottest July day on record (a sweltering 38C) and the value of the pound hit its lowest levels against the euro since the 2008 global financial crisis.  Only one of these events is unrelated to Brexit.

On July 27, 2017, Andrew Bailey, the chief executive of the UK Financial Conduct Authority (FCA), announced in a speech that after 2021 the FCA would no longer use its power to persuade or compel panel banks to submit rate information used to determine LIBOR. Mr. Bailey encouraged the market to develop robust alternative reference rates to replace LIBOR.

This speech marks a turning point in the history of LIBOR. Regulators have been concerned that LIBOR may cease to exist as a financial benchmark, and that such cessation could cause significant disruption to the market. Mr. Bailey’s announcement of an arbitrary deadline has caused market participants to look anew at replacing references to LIBOR in a large number of financial contracts with references to alternative reference rates now being developed, and to reconsider LIBOR fallback language currently contained in existing contracts. Mr. Bailey’s remarks also indicate that the reform of LIBOR, which had been a regulatory goal, is no longer a viable option in the FCA’s view.