![]() ![]() You can read the speech he gave at the event: ' Descending Safely: Life after LIBOR'. The Governor, Andrew Bailey, joined the ARRC’s second SOFR Symposium event to discuss a sustainable transition from LIBOR. We published a consultation paper on our proposal to modify the scope of contracts which are subject to the derivatives clearing obligation, to reflect ongoing reforms to interest rate benchmarks. This is to facilitate a shift in market liquidity towards SOFR, bringing benefits for a wide range of users as they move away from LIBOR. The FCA and Bank of England support and encourage market participants in a switch to SOFR in US dollar linear interest rate swap markets from 26 July this year. We issued a joint statement with the FCA supporting the US-led ‘SOFR First’ initiative. This is to facilitate a further shift in market liquidity toward RFRs, bringing benefits for a wide range of users as they move away from LIBOR. The FCA and the Bank of England support and encourage market participants in a switch to RFRs in the LIBOR cross-currency swaps market from 21 September this year. We issued a joint statement with the FCA supporting an ‘RFR First’ initiative for cross-currency swaps currently based on LIBOR, coordinated jointly across relevant jurisdictions. The consultation closes on 27 October 2021. We also published a supplementary consultation paper which proposes to introduce a clearing obligation for OIS that reference TONA. We published our final policy on our proposal to modify the scope of contracts subject to the derivatives clearing obligation, to reflect ongoing reforms to interest rate benchmarks. This change will come into force on 31 January 2022, to provide firms sufficient time to complete their preparations. We published our final policy on our proposal to introduce a clearing obligation for OIS that reference TONA. The FCA also provides guidance on the LIBOR transition. The Bank of England and the FCA participate as ex-officio members and provide administrative support to the group. It produces guidance and support for both financial and non-financial firms to help them with the transition. The industry-led Working Group on Sterling Risk-Free Reference Rates (the Working Group) leads this work in sterling markets. We will continue to support firms to actively transition any outstanding LIBOR exposures. We have worked closely with the Financial Conduct Authority (FCA) and market participants to support a smooth transition to these alternatives. These include the Sterling Overnight Index Average (SONIA) benchmark, which we produce. ![]() Risk-free rates (or RFRs), which are robust alternatives to LIBOR, are available. These synthetic US dollar LIBOR settings are planned to cease at end-September 2024. ![]() The FCA announced on 03 April 2023 that the 1-, 3- and 6-month US dollar LIBOR settings will continue on a synthetic basis beyond the cessation of the US dollar LIBOR panel at end-June 2023. Five US dollar LIBOR settings will continue to be calculated using panel bank submissions until end-June 2023, although its use for new business has been restricted since end-2021, with limited exceptions. 3-month sterling LIBOR will continue on a synthetic basis until end-March 2024. In line with further announcements from the FCA, three yen LIBOR settings continued for the duration of 2022 on a ‘synthetic’ basis and 1- and 6-month sterling LIBOR continued on a synthetic basis until end-March 2023. In line with announcements from the Financial Conduct Authority (FCA), publication of 24 of the 35 LIBOR settings ceased from 1 January 2022. The low volume of underlying transactions means that LIBOR is no longer sustainable. Since the global financial crisis in 2008-09, activity in the markets that LIBOR measures has reduced. It determines interest rates for financial contracts around the world. LIBOR has historically been one of the main interest rate benchmarks used in financial markets.
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