On 13 July 2020, the Bank of England (BoE) published a speech by its Governor, Andrew Bailey, entitled ‘Libor: Entering the Endgame’.

Key points in the speech include:

  • Plans now need to be in place to transition from Libor to alternative reference rates by end 2021. With 18 months to go these plans must now be acted upon in the time remaining.
  • Despite the COVID-19 pandemic, work on transition in sterling markets has continued. There has been considerable progress since last year – both here in the UK and the US.
  • Communication and education for businesses exposed to Libor is a huge challenge. The early focus has been on raising awareness across those in the financial industry that generate Libor linked exposure that will need to support their clients through transition. Increasingly though, regulators’ and markets’ efforts need to turn to much broader communication to ensure the end users of Libor understand the weaknesses with the rates, why they need to move to alternatives and what the timeline is for the action they will need to take to prepare for that move.
  • From next month, as previously announced, the BoE will begin the publication of a freely available compounded SONIA index to support the use of the rate across a wide range of sterling products.
  • In September, the Working Group on Sterling Risk-Free Reference Rates will begin a further program of public communications to help those with Libor linked exposures navigate onto more robust alternatives.
  • From October UK banks should all be offering alternatives to Libor. A number of the largest UK lenders are already doing this. If a firm decides to borrow linked to Libor then their bank should discuss how that contract will change from Libor to an alternative rate ahead of the end of 2021. The BoE would not expect to see any further sterling Libor linked lending after the end of March 2021. Regulated firms in the UK should expect their supervisors to monitor and discuss their progress with these milestones.