LONDON - Britain's Financial Conduct Authority proposed on Wednesday to allow a 'synthetic' form of the dollar denominated Libor interest rate benchmark until September 2024, when use of what was once dubbed the world's most important number will end permanently.

The bulk of London Interbank Offered Rate (Libor) permutations across five currencies for new contracts were scrapped at the end of last year, replaced with 'risk free' rates compiled by central banks after lenders were fined billions of dollars for trying to rig Libor.

Some dollar and sterling Libor rates were allowed to continue to give banks and companies time to shift contracts worth trillions of dollars, such as mortgages, student loans and credit cards, to the central bank rates.

Remaining dollar Libor rates based on quotes from banks end in June 2023 and markets were waiting to see if there would be an extension in some form to help markets switch outstanding contracts to another rate.

The FCA on Wednesday proposed to allow 1-, 3- and 6-month dollar Libor quotes to continue under "an unrepresentative 'synthetic' methodology" until the end of September 2024, and then cease permanently.

It was estimated last year that $70 trillion of dollar Libor exposures would remain outstanding beyond June 2023, the FCA said.

"It is not for use in new contracts. It is intended for use in certain legacy contracts only," the FCA said in a statement.

The watchdog said that for sterling Libor, the compiler can continue publishing its 3-month synthetic version until the end of March 2024 and then cease permanently.

The synthetic yen Libor will cease permanently at the end of 2022, the FCA said.

"Any synthetic Libor settings are only a bridge to appropriate alternative risk-free rates, not a permanent solution," the FCA said.

"As such, market participants should continue to prioritise active transition and focus on converting their legacy contracts to risk-free rates as soon as possible."

(Reporting by Huw Jones; Editing by Jon Boyle and Chizu Nomiyama)