NatWest to quit US dollar Libor panel at year-end

Fifteen banks will continue submitting US dollar Libor quotes until mid-2023

NatWest Group will withdraw from the panel that sets US dollar Libor rates at the end of this year, Risk.net has learned, taking the number of banks submitting quotes for the benchmarks down to 15. 

In August 2017, NatWest – then known as Royal Bank of Scotland Group – agreed to continue submitting quotes for Libor until the end of 2021, after which point the UK’s Financial Conduct Authority (FCA) said banks would be free to stop supporting the rates.

Last year, Libor’s administrator proposed a plan to continue publishing five widely used US dollar benchmarks until June 30, 2023. The UK bank decided to step away from the rate-setting panel, rather than committing to an extension.

The FCA confirmed on March 5 that publication of most Libor benchmarks will cease on December 31, 2021, with the five US dollar rates continuing for another 18 months. 

As a UK-focused retail and commercial bank, NatWest had only a small footprint in the US dollar wholesale market. This is understood to have been at the heart of its decision to stop contributing to the US dollar benchmark.

A spokesperson for NatWest declined to comment.    

NatWest will become the first institution to pull out of the US dollar Libor panel since Societe Generale stopped submissions in 2017. The French bank was subsequently fined $275 million in 2018 by the US Department of Justice after admitting to manipulating dollar Libor between May 2010 and at least October 2011.

Ice Benchmark Administration, which oversees the publication of the benchmarks, launched a market consultation on December 4 seeking feedback on its plan to continue publishing the most popular US dollar Libor settings beyond the end of 2021. To do so, the IBA needed the majority of panel banks to commit to voluntarily submitting quotes for US dollar Libor for another 18 months.

The IBA’s feedback statement on its consultation, published in March, noted that 15 of the current 16 panel banks had agreed to continue submitting quotes for the five dollar Libor settings until June 30, 2023. The exception was NatWest.

Following the consultation, IBA concluded that it would be able to continue publishing the five US dollar Libor settings in a “representative” manner until June 30, 2023. The FCA agreed with that assessment. 

“The FCA has confirmed to IBA that, based on undertakings received from the panel banks, it does not expect that any Libor settings will become unrepresentative before the above intended cessation dates for such settings,” reads the consultation.

The FCA will now consult on whether to use powers included in the UK’s Financial Services Bill to extend the life of six Libor settings beyond the end of this year.

The regulator will seek feedback on whether to publish synthetic versions of one-, three- and six-month sterling and yen Libor without relying on panel banks. Synthetic yen Libor rates would be published for another 12 months, while synthetic sterling rates could be available for a “further period”. Use of the synthetic Libor rates would be limited to legacy contracts that are hard to shift to new reference rates.

The FCA has said it will monitor the need for synthetic versions of one-, three- and six-month US dollar rates after they cease publishing on June 30, 2023.

“As the transition away from US dollar Libor progresses, we will continue to consider the case for using these proposed powers also to require continued publication on a synthetic basis of the one-month, three-month and six-month US dollar Libor settings for a further period after end-June 2023, taking into account views and evidence from the US authorities and stakeholders,” the FCA said in a statement released on March 5.