In fact the scope for SONIA adoption in markets beyond derivatives is a key issue we want to explore – and will be discussed in the panel sessions later today. We do not underestimate the complexity of reducing the financial system’s Libor dependency. We are at the beginning of the process, and at this early stage the challenges are not all clearly in focus. That is why the engagement, help and support of the wider community of users of sterling interest rate benchmarks – issuers, investors, banks, as well as dealers – will be essential. The Working Group needs your help to identify the impediments to transition as you see them – and, equally, to identify where there are opportunities. That is why you are here today. The way ahead So what happens now? I have argued that, over time, we need to see a broad transition away from sterling Libor towards SONIA. That will require changes in the behaviour of firms that carry some cost. But, where SONIA better matches the risks firms are hedging, there will be long-term benefits. Moreover the financial system will be safer. The Bank has already laid the groundwork for transition by reforming SONIA and creating the risk-free rate working group. We will continue to use our convening power to support the Working Group in driving adoption of SONIA. We will help market participants to understand changes in the environment and how they might be affected.
These novelties will be offered to the public as a modest contribution to the formation of a modern and dignified state for the Albanian nation. At present, fulfilling these obligations has become a more difficult task due to negative effects arising from the global economic crisis. Most evidently, labour markets, capital markets and economic activity remain under the effect of contraction of consumption and investments in the private sector. The anaemic reaction of the markets has placed central banks in a difficult position, a solution without any choice, i.e. intervene in the economy with all the instruments to address current emergencies while the other factors are forced to contract in favour of the long-term stability of public and private balances. In this situation, central banks are obliged to undertake a series of extreme and qualitatively-different measures, which have been never tested before and exceed all imaginary boundaries of the monetary policy. Actually, politicians are obliged to cope with debt crisis through an extreme fiscal policy aiming at short-term balancing and long-term stability of the fiscal policy. The focus and emphasis of the economic policy remains long-term rebalancing by cutting on expenses. An important part of these measures is very focused on the short-term problematic, hence risking to disregard the undesired effects in the long term. Under the pressure from social costs, the philosophy of current policies is to overcome the situation and maintain social peace and macroeconomic stability at the expense of sovereignty.