This monthly newsletter provides an update for those with an interest in the work of the Bank of England Working Group on Sterling Risk-Free Reference Rates, keeping you updated on key news relating to RFR transition in GBP markets and others.
Key Milestone Dates
• Francois Jourdain chaired his final meeting of the Working Group on 12th December and will now hand over to Tushar Morzaria (Barclays CFO).
Working Group on Sterling Risk-Free Reference Rate Updates
- The Working Group has published a paper detailing relevant considerations for market participants continuing to transact LIBOR-linked loans. This follows a similar paper published earlier in the year on LIBOR-linked bonds.
- The Working Group has published a provisional infrastructure and systems priority list detailing key infrastructure developments which would facilitate RFR transition.
- The Working Group has published the minutes from its November meeting at which it discussed the summary responses to the TSRR consultation. The Working Group has discussed issuing a statement in response to the consultation.
- The Working Group has also published the minutes from its October meeting at which it discussed the proposed starter pack, creation of a monthly newsletter and potential steps for engaging with the media.
- ISDA has published a report summarising the final results of its consultation on IBOR fallbacks.
- LCH has announced its position in respect of ISDA’s recommended benchmark fallback approaches.
- The International Accounting Standards Board has published a staff paper on the potential accounting implications of IBOR transition. The Board has agreed to add IBOR reform to its standard setting programme.
- IBA have published a survey on the use of LIBOR to inform its work in seeking to support publication of certain LIBOR settings. IBA states there is no guarantee that any LIBOR settings will continue to be published after year-end 2021.
- The first securitisation referencing SONIA was issued on 14 December.
- As at 10/12/18, there had been £6.875bn of SONIA-linked floating rate notes issued, each following a similar conventions format.
Official Sector Updates
- The PRA and FCA Dear CEO letter response deadline of 14th December has now passed. The PRA and FCA are now assessing responses.
Non-Sterling RFR Updates
- The Working Group on Euro risk-free rates is seeking market feedback on EONIA-ESTER transition and ESTER based term structure methodologies
- The ARRC (US Alternative Reference Rate Committee) released consultations on U.S. dollar (USD) LIBOR fallback contract language for bilateral business loans and securitizations for public feedback. Responses are requested by 5th February 2019.
- The ARRC has also published the responses it has received to its consultations on fallbacks in FRNs and syndicated loans. The ARRC expects to issue final recommendations in early 2019.
- FINMA has published guidance on the risks of a potential replacement of LIBOR.
- CFTC Chairman J Christopher Giancarlo spoke at the Financial Stability Conference outlining criticality of the transition
- JBA TIBOR Administration (“JBATA”) has extended the deadline on its consultation on integrating Japanese Yen TIBOR and Euroyen TIBOR to January 18 2019.
Key Liquidity Indicators
Listed Futures (data provided by futures exchanges)
LCH Swaps Statistics (from LCH website)