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
• Responses to PRA/FCA Dear CEO letter due 14th Dec 2018 (large banks and insurers).
Working Group on Sterling Risk-Free Reference Rate Updates
- The Working Group has published a starter pack titled, ‘Preparing for 2022: What you need to know about LIBOR transition”. The pack is designed is designed to inform readers about the transition from LIBOR to alternatives such as SONIA. The Working Group encourages interested parties to use this pack to engage with internal and external stakeholders on this topic.
- The Working Group on Sterling Risk-Free Rates has now closed the consultation paper on term SONIA reference rates. Responses received provided a highly useful and informative insight into the topic. The Working Group will now review a summary of the responses and consider next steps.
- The Working Group published a Syndicated loan replacement of screen rate clause – originally published on the LMA website, the clause can be included in new loans referencing LIBOR and allows for easier transition to alternatives at a given point in the future.
- The Working Group published minutes of its September meeting, at which it discussed and approved the wording for its statement on considerations around credit spread adjustment options in the ISDA consultation on fallbacks rates.
- The Pensions Funds and Insurance Companies (P&I) SONIA Adoption sub-group has contacted the European Insurance and Occupational Pensions Authority (EIOPA) with regard to Solvency II and its implications for RFR transition.
- CME launched SONIA-linked futures on 1st October.
- Ice Benchmark Administration (IBA) have published their initial proposals for calculating and publishing ICE Term Risk-Free Rates commencing with SONIA.
- ICE have launched a Term Risk-Free Rates Portal. This follows a similar portal launch from ClarusFT in August which shows effective SONIA rates over a given period.
- ISDA Consultation on Fallbacks for Derivatives (originally due 12th October) was extended to October 22nd and is now closed.
- Up until end October, in excess of £5.5bn in SONIA-linked bonds had been issued.
Official Sector Updates
- The Official Sector Steering Group has published its latest progress report on reforming major interest rate benchmarks. The report sets out the progress made on the development of overnight nearly risk-free rates (RFRs) and markets based on these rates, and on further reforms to interbank offered rates (IBORs).
Non-Sterling RFR Updates
- Alternative Reference Rates Committee (ARRC) held webinars on its previously released consultations on USD LIBOR fallback contract language for floating rate notes and syndicated business loans, to help the public understand and respond to the requests for feedback during the ARRC’s comment period.
- On 26 October, Financial Accounting Standards Board added SOFR to its list of U.S. benchmark interest rates for the purposes of hedge accounting.
- On 9 October the Working Group on Euro Risk-free Rates held a ‘Roundtable on euro risk-free rates’, hosted by European Central Bank (ECB). The agenda, slides and video presentations have all been published on the ECB’s website.
- The Swiss National Working Group published its latest minutes as well as a document on operational readiness.
Key Liquidity Indicators