Summary Minutes of Sub-Group and Task Force Meetings – October 2023

Minutes

Introduction

Following the cessation of most LIBOR settings at the end of 2021, the Working Group on Sterling Risk-Free Reference Rates (the “Working Group”) concluded at its January meeting that it had met its objective to “catalyse a broad-based transition to SONIA across sterling derivative, loan and bond markets”.

Following this meeting, the Working Group confirmed that all Sub-Groups and Task Forces – except for the Bond Market Sub-Group, Loan Enablers Task Force and Communications and Outreach Sub-Group – would close as the Working Group moves into 2022 in a new form, with new objectives, and with continued support from the Bank of England and FCA.

The new overall objective is to assist in finalising the transition away from LIBOR, via:

  1. Supporting the continued active transition of legacy contracts from synthetic sterling LIBOR to SONIA, and
  2. Considering any implications of non-sterling LIBOR transition in UK markets.

To aid transparency in its new form, the Working Group will publish summaries of the meetings of its Sub-Groups and Task Forces. Please see below for summaries of recent meetings.

The Bond Market Sub-Group (the “BMSG”):

Chair: Paul Richards ICMA

At the BMSG meeting on 17 October, the Chair referred to recent publications by the FCA, Bank of England, Federal Reserve Bank of New York, Financial Stability Board and IOSCO following the cessation of the US dollar LIBOR panel on 30 June 2023. The BMSG members then discussed preparations in the bond market for the cessation of synthetic sterling LIBOR and synthetic US dollar LIBOR.

The Chair thanked BMSG members, 18 of whom had provided input for the meeting on the following two questions, and drew members’ attention to the responses provided:

1. Are you aware of any technical problems in the bond market arising from the change in definition and composition from panel bank US dollar LIBOR to synthetic US dollar LIBOR for legacy bonds?

The Chair noted all 18 respondents either (i) confirmed they were not aware of any technical issues relating to the change in definition or composition from panel bank US dollar LIBOR to synthetic US dollar LIBOR, or (ii) made no comment. 

2. Do you have any remaining concerns about the ability of the bond market to complete preparations in time for the FCA’s proposed cessation dates for synthetic sterling and synthetic US dollar LIBOR? If you do have concerns, please could you set these out briefly, and also explain how you think they might best be addressed.

The Chair noted that over two-thirds of BMSG respondents confirmed they did not have any remaining concerns regarding the ability of the bond market to complete preparation in time for the FCA’s proposed cessation dates, or confirmed that they did not have any particular new concerns other than those previously noted by the BMSG. The remaining respondents offered some additional comments which were addressed by the FCA and Bank of England representatives at the meeting, after which there were no further comments or questions from BMSG members.

BMSG members reviewed progress on active transition of legacy (i) 3-month synthetic sterling LIBOR bonds in the form of Floating Rate Notes (FRNs) maturing after the FCA’s proposed cessation date for synthetic sterling LIBOR (28 March 2024) and (ii) synthetic US dollar LIBOR FRNs maturing after the FCA’s proposed cessation date for synthetic US dollar LIBOR (30 September 2024). Finally, BMSG members received a short update by a market representative on recent developments in the new issue market referencing SONIA and SOFR.

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