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:
- Supporting the continued active transition of legacy contracts from synthetic sterling LIBOR to SONIA, and
- 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
At its meeting on 28 June, the BMSG reviewed the written responses received from BMSG members to a set of technical questions asked at the previous meeting on 21 April. These related to: legacy synthetic sterling LIBOR bonds; SOFR market conventions in new bond issues under English law; active transition of legacy US dollar LIBOR bonds under English law; and synthetic US dollar LIBOR under English law. The meeting also discussed the availability of legacy sterling and US dollar LIBOR bond data.
The main aim of the BMSG meeting was to discuss the written responses, which had been provided to members anonymised and in a consolidated form ahead of the meeting, with a view to determining whether or not they represented a consensus across the BMSG as a whole, particularly on questions relating to legacy US dollar LIBOR bonds under English law. The Chair asked BMSG members to respond to some follow-up questions on this matter, for discussion at a future meeting of the BMSG.
BMSG members were also encouraged to respond to a forthcoming FCA consultation paper on winding down synthetic sterling LIBOR settings.
The Loan Enablers Task Force (the “LETF”):
Chair: Jamieson Thrower, NatWest
At the meeting of the LETF on 14 July, members considered the launch of the FCA’s consultation on winding down synthetic sterling LIBOR and US dollar LIBOR. The FCA reiterated the importance of ensuring as broad a set of responses from market participants as possible.
The LETF also considered the recent event co-hosted by the Federal Reserve Bank of New York and the FCA, discussing levels of readiness for the cessation of US dollar LIBOR and a Playbook launched by the ARRC to aid market participants in successfully navigating the cessation of USD LIBOR at end June 2023.
As a final discussion point, the LETF considered the levels of usage of new USD LIBOR and the mix of compounded SOFR and term SOFR being used as existing facilities started to transition. New use of USD LIBOR remains low and as an exception only. Most facilities are transitioning to compounded SOFR in contrast to the US.