We joined the Risk.net LIBOR Telethon on 8 December 2020. You can read the speech our Executive Director for Markets, Andrew Hauser, gave at the event: ‘Bowing out gracefully: LIBOR’s retirement draws near’.
Our Financial Policy Committee said in its Financial Stability Report that it remains essential for firms to end reliance on LIBOR, and welcomed the recent release of consultations from IBA on proposed cessation dates for all LIBOR settings and from the FCA on a potential approach to use of proposed new powers to support an orderly wind-down of LIBOR benchmarks.
We hosted a webinar event ‘Is your firm prepared for LIBOR transition?’ in collaboration with the Association of Corporate Treasurers and the Confederation of British Industry. You can watch the webinar and read the speech our Executive Director for Markets, Andrew Hauser, gave at the event: ‘From LIBOR to SONIA: a bridge to the future’.
We published a Bank Overground post looking at why firms need to accelerate in the transition away from LIBOR benchmarks.
Alongside the FCA, we issued a statement encouraging market makers and interdealer brokers to switch from quoting LIBOR to SONIA as the default price for sterling swaps from 27 October 2020.
Our Financial Policy Committee said in its Financial Stability Report that it is essential for firms to end reliance on LIBOR benchmarks before the end of 2021 because after that, those benchmarks become unavailable at short notice. Moving away from using LIBOR would give firms more certainty than relying on regulatory action enabled by proposed new powers for the FCA under the Financial Services Bill 2020.
We facilitated an online roundtable event, hosted by HM Treasury and the FCA. We asked market participants to send in their questions about HMT’s plans to enhance the FCA’s tool-kit for wind-down of critical benchmarks.
We hosted a webinar event ‘LIBOR: entering the endgame’. You can watch the webinar and read the speech our Governor, Andrew Bailey, gave at the event.
The Prudential Regulation Authority (PRA) published a statement on the implications of benchmark reform for rules related to resolution.
In its interim Financial Stability Report, our Financial Policy Committee recognised a need for short-term reprioritisation, in light of the Covid-19 pandemic. However, the market volatility during March 2020 highlighted the long-standing weaknesses of LIBOR benchmarks, reinforcing the importance of completing the transition to alternative rates by the end of 2021.
The PRA published a statement on the reprioritisation of its work due to the impact of Covid-19. As part of this, some data reporting and firm meetings on LIBOR were temporarily suspended, with full supervisory engagement on LIBOR resuming from 1 June 2020.
In light of this short-term reprioritisation, we issued a revised Market Notice regarding the use of LIBOR-linked collateral, maturing after 31 December 2021, used in the Sterling Monetary Framework. From 1 April 2021, the Bank will make newly issued LIBOR-linked collateral maturing after end-2021 ineligible and progressively increase the haircuts on existing LIBOR-linked collateral it lends against.
Together with the FCA, we wrote to CEOs of trade associations setting out how LIBOR transition could affect trade association members and called for help in raising awareness of transition amongst their networks.
Our Executive Director for Markets, Andrew Hauser, set out in a speech two new initiatives from the Bank aimed at further supporting risk-free rate transition in sterling markets.
This included the February Market Notice that the Bank would begin increasing haircuts on LIBOR-linked collateral it lends against from 1 October 2020. However in light of the Covid-19 pandemic, this was postponed to begin from 1 April 2021.
The PRA and FCA jointly wrote to senior managers responsible for LIBOR transition in regulated firms. It set out the progress expected from these firms in 2020.
Together with the FCA, we issued a statement encouraging market makers and interdealer brokers to switch from LIBOR to SONIA as the default pricing approach for sterling swaps trading from 2 March, to transition progress in the derivatives market. Due to market volatility experienced during March, this date was later rescheduled for 27 October.