Following the recommendation by the Financial Stability Board to move away from the discredited Libor benchmark to more robust risk-free rates, and in common with other central banks, the Bank of England convened a Working Group on Sterling Risk-Free Reference Rates (RFR WG). During 2017, this RFR group identified SONIA as the preferred risk-free benchmark for sterling, and the preferred replacement benchmark for GBP Libor.
Since the UK Financial Conduct Authority (FCA) announced last year that it would no longer use its powers to compel panel banks to contribute to Libor post-2021, the ACT has been working closely with other interested parties (trade associations, benchmark providers, the FCA and the Bank of England) to ensure that the needs of the corporate sector (real economy) are not overlooked as any transition away from Libor is worked through.
Membership of the RFR WG, which was initially largely limited to financial institutions, has recently been expanded and now includes a wide range of market participants from both the buy side and the sell side, including the ACT and a number of corporate representatives.
The revised role of the RFR WG is now to identify and resolve the challenges that transitioning to a new reference rate will bring to the various activities that currently reference Libor, such as syndicated loans, floating rate notes, interest rate derivatives, pensions valuations, corporate commercial contracts and so on.
Keep up-to-date with developments on the ACT's dedicated Policy & Technical benchmark reform webpage