Summary Minutes of Sub-Group and Task Force Meetings – April/May 2022

The Working Group on Sterling Risk-Free Reference Rates, which is comprised of a diverse set of market participants, is working to assist in finalising the transition away from LIBOR.
Published on 09 June 2022

Minutes

Introduction

Following the cessation of most LIBOR settings at the end of 2021, the Working Group on Sterling Risk-Free Reference Rates (the “Working Group”) concluded at its January meeting that it had met its objective to “catalyse a broad-based transition to SONIA across sterling derivative, loan and bond markets”.

Following this meeting, the Working Group confirmed that all Sub-Groups and Task Forces – except for the Bond Market Sub-Group, Loan Enablers Task Force and Communications and Outreach Sub-Group – would close as the Working Group moves into 2022 in a new form, with new objectives, and with continued support from the Bank of England and FCA.

The new overall objective is to assist in finalising the transition away from LIBOR, via:

  1. Supporting the continued active transition of legacy contracts from synthetic sterling LIBOR to SONIA, and
  2. Considering any implications of non-sterling LIBOR transition in UK markets.

To aid transparency in its new form, the Working Group will publish summaries of the meetings of its Sub-Groups and Task Forces. Please see below for summaries of recent meetings.

The Bond Market Sub-Group (the “BMSG”)

Chair: Paul Richards, ICMA

The BMSG met on 21 April with updated terms of reference under which the BMSG’s overall objective is “to support the active transition of legacy bonds from synthetic sterling LIBOR to SONIA, and to consider any implications of non-sterling LIBOR transition in UK bond markets”. The composition of the BMSG has changed to reflect its revised terms of reference.

At the meeting, the BMSG considered the transition of legacy synthetic sterling LIBOR bonds to SONIA, including progress in undertaking consent solicitations. It also considered the transition of US dollar floating rate bonds in UK markets under English law, including: market conventions for new issues of SOFR FRNs and securitisations in UK markets under English law; fallbacks for legacy US dollar LIBOR bonds under English law; and similarities and differences between legacy US dollar LIBOR bonds under English law and federal US law.

As an action point arising from the meeting, the Chair asked BMSG members to respond to a number of technical questions relating to these issues.

The Loan Enablers Task Force (the “LETF”)

Chair: Jamieson Thrower, NatWest

The LETF met on 6 May with updated terms of reference, under which the LETF’s overall objective is to support the active transition of legacy loans from synthetic sterling LIBOR to SONIA, and to consider any implications of non-sterling LIBOR transition in UK lending markets. The composition of the LETF remains broadly unchanged.

At the meeting, the LETF considered the current landscape of the synthetic LIBOR loan population and any barriers to effecting transition to an alternative, permanent RFR. It also considered the likely impact on the GBP loan market of a consultation on the continued provision of 1 and 6 month synthetic LIBOR. It was noted that there remained a number of PFI loans and associated derivatives referencing 6-month synthetic GBP LIBOR, and whilst transition progress was being made, it was very slow.

As a final discussion point the LETF sought a temperature check on the state of progress and readiness in the loan market in respect of USD LIBOR transition.

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