Turbo-charging sterling LIBOR transition: why 2020 is the year for action – and what the Bank of England is doing to help - speech by Andrew Hauser

Given at the International Swaps and Derivatives Association/SIFMA Asset Management Group Benchmark Strategies Forum 2020, London
Published on 26 February 2020

In his speech today Andrew Hauser, Executive Director, Markets, announces two new initiatives aimed at further supporting risk free rate transition.

Firstly, the Bank intends to publish a daily SONIA Compounded Index. This would support the use of SONIA in as wide a range of financial products as possible by simplifying the calculation of compounded interest rates. The Bank is also considering publishing a simple set of compounded SONIA Period Averages, subject to a clear consensus from the market on the preferred conventions to be used. The Bank is inviting comment on the options presented in the discussion paper, after which it will decide whether it would be helpful to publish such averages.

Secondly, Andrew announces that from October 2020 the Bank will begin increasing haircuts on LIBOR-linked collateral it lends against.  From 2020 Q3, the Bank will progressively increase the haircuts on LIBOR-linked pre-positioned collateral.  Haircuts are scheduled to reach 100% (i.e. implying effective ineligibility) at the end of 2021.

PDFTurbo-charging sterling LIBOR transition: why 2020 is the year for action – and what the Bank of England is doing to help

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