Replicating this success in the bilateral and syndicated loan markets – where LIBOR remains the norm – is a different challenge, for at least three reasons:  -  First, these markets involve a much wider range of lenders and borrowers, from the most complex global banking groups and largest multinational corporates, to the smallest regional lenders and businesses – many of whom have been distant from earlier stages of the transition effort;  -  Second, they rely on a deeply-embedded and relatively fixed infrastructure of pricing conventions, legal agreements and systems; and  -  Third, they are largely private markets, making it harder to observe progress using public data and demonstrate change. Acknowledging these challenges, in 2018 the Working Group broadened its membership to include key participants on all sides of the loan markets. Since then, the Group has undertaken a range of initiatives to explore ways to standardise conventions both domestically and cross-border, meet with loan and treasury systems providers to develop the infrastructure to support SONIA, and standardise documentation. In turn, this work helped support the early examples of sterling SONIA linked loans we saw last year to household names including National Express, South West Water and Associated British Ports. So, as with wholesale markets, it can be done. But to meet the Q3 target will require a substantial scaling up of what has so far been a cottage industry. Much of the onus for that lies with individual lenders, and many already have pilot loans in the pipeline.
However, many firms and households have taken on more debt during the pandemic. A deterioration in the economic outlook could threaten their financial health. This, in turn, would worsen the quality of banks’ balance sheets. Policy support remains essential to prevent balance sheet strains and tightening financing conditions from reinforcing each other. Conclusion Summing up, the euro area economy is clearly rebounding. However, the speed of the recovery continues to depend on the course of the pandemic and progress with vaccinations. The current rise in inflation is expected to be largely temporary and underlying price pressures will build up only gradually. The slight improvement in the medium-term inflation outlook and the current level of financing conditions allow favourable financing conditions to be maintained with a moderately lower pace of net asset purchases under the PEPP. Our policy measures, including our revised forward guidance on the key ECB interest rates, are key to helping the economy shift to a sustained recovery and, ultimately, to bringing inflation to our two per cent target. We are now ready to take your questions. 3/3  BIS central bankers' speeches