On 11 May 2021, the Bank of England published a speech by its Governor, Andrew Bailey, entitled Descending safely: Life after Libor.
In his speech Mr Bailey focuses on the transition away from Libor and covers:
- Developments in sterling markets.
- The use of forward looking term risk-free rates.
- Moving to the most robust reference rate.
When discussing developments in the sterling markets Mr Bailey issues a warning to those firms regulated by the PRA who may be guilty of what he calls “lazy behaviors” in unnecessarily sustaining Libor linked contracts. He reminds firms that UK supervisors have been consistent and clear that they support the industry-agreed milestones of the Working Group on Sterling Risk-Free Reference Rates and have set their expectations in line with these. He further reminds firms that the necessary reporting is in place and that their supervisors will be speaking with them. He adds that the transition away from Libor is a risk management issue and relevant senior managers in firms will be responsible for ensuring suitable policies and oversight are in place. Firms regulated by the PRA in the UK that fail to prudently manage transition will be treated in the same way as firms demonstrating any other risk management / governance failings.