Andrew Bailey: Descending safely – life after Libor

Speech by Mr Andrew Bailey, Governor of the Bank of England, at Alternative Reference Rates Committee – the SOFR symposium: The final year, 11 May 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Many thanks to Tom [Wipf] and the Alternative Reference Rates Committee (ARRC) for the invitation to join today's SOFR symposium and to John [Williams] for his remarks.

Introduction

I have spoken on the transition from Libor each year since 2017 when we set out that despite the significant improvements in its governance and oversight, there were increasing challenges in anchoring the submissions on which those rates were based, to the greatest extent possible, in actual transactions.

The underlying market that Libor seeks to measure – the market for unsecured wholesale term lending between banks – is no longer sufficiently active to support such a widely used reference rate. This has not changed in the last four years.

At that time we highlighted the market disruption that could stem from an unplanned disappearance of Libor. Working together with the panel banks and the wider market, it was in the interest of all involved that we stabilised those rates until such times as transition arrangements were sufficiently well advanced.

Well the summit, or summits that are the cessation dates for Libor are now clearly on the horizon with the FCA announcing earlier in the year that Friday 31 December 2021 will be the final publication date for panel bank sterling, Japanese yen, Swiss franc and euro Libor rates along with a number of lesser used US dollar tenors. The remaining US dollar tenors will cease in mid-2023.