On 24 August 2022, the Bank of England (BoE) published a Policy Statement setting out its final policy in relation to adding overnight index swaps (OIS) that reference the Secured Overnight Funding Rate (SOFR) to the scope of contracts subject to the derivatives clearing obligation (DCO) and removing contracts referencing USD Libor.

The Policy Statement is relevant to financial and non-financial counterparties that are subject to the DCO under the on-shored European Market Infrastructure Regulation (EMIR), and to central counterparties (CCPs).

The BoE confirms that it is maintaining the proposal that it originally consulted on in June which is to add SOFR OIS contracts with an original maturity between 7 days and 50 years to the DCO from 31 October 2022 and to subsequently remove contracts referencing USD Libor. It also proposed to align the date on which USD Libor contracts would be removed from the DCO with CCPs contractual conversions of those contracts (which it anticipated would occur in Spring 2023). Consistent with that proposal, the BoE confirms that contracts referencing USD Libor will be removed from the DCO on 24 April 2023.

The BoE has implemented its final policy via amendments to Commission Delegated Regulation (EU) 2015/2205 of 6 August 2015 supplementing the EMIR with regard to regulatory technical standards on the clearing obligation (Binding Technical Standards 2015/2205).

The BoE states that this is the last of the planned amendments to the DCO in the light of the transition to Risk-Free Rates. The BoE will continue to keep the wider DCO under review.