6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  The state of play in sterling so far I’ve highlighted the problems with continuing to rely on Libor, but the positive side of this is the progress that continues to be made in creating deep and liquid markets in robust alternatives. In sterling, the chosen alternative is SONIA, produced by the Bank of England. The market for SONIA linked derivatives is well established. The share of swaps traded using SONIA is broadly equivalent to that linked to Libor, with continued growth at longer maturities. Volumes in Libor linked options are decreasing and there are promising signs of a SONIA options market developing; we have also seen growth in SONIA futures during the first half of 2020. There is now a fully functioning SONIA linked bond market with 40 Floating Rate Notes issued, totalling over £ so far this year. In total, there has now been issuance of over £ of bonds referencing compounded SONIA. There has also been in excess of £ of publicly distributed SONIA linked securitisations since April 2019. We have seen businesses such as Shell, South West Water, Associated British Ports, National Express Group and Riverside Group all move borrowing on to near risk-free rates. March saw the first multi-currency revolving credit facility linked to both SONIA and SOFR. The industry is making progress on the conventions underlying these products and infrastructure vendors are ensuring their products can support SONIA linked products.
And from next month, as previously announced, the Bank of England will begin publication of a freely available compounded SONIA index to support use of the rate across a wide range of sterling products. Avoiding the problem won’t make it smaller or change the need to transition. The answer is for us collectively to confront the challenge and make the necessary progress over the next 18 months. 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. But well done is better than well said, and from October UK banks should all be offering alternatives to Libor. Indeed, a number of the largest UK lenders are already doing this. I’d suggest if you are borrowing past the end of 2021 you consider seriously the greater certainty that those alternatives offer. If you do decide to borrow linked to Libor then your bank should discuss how that contract will change from Libor to an alternative rate ahead of the end of 2021. We 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 important milestones.