Similar to the experience in the GBP bond markets, compounded in arrears rates have quickly established themselves as a robust and useable market standard. They offer borrowers a transparent rate based on substantial volumes of real transactions and lenders a durable rate that will function through a range of scenarios. It is promising to see the progress made in SONIA and as liquidity continues to shift, the benefits of transitioning new business from Libor becomes even clearer. But it is also imperative we have a clear path for existing or ‘legacy’ Libor contracts to transition in a robust manner. Legislative processes in the US, EU and UK continue to progress in establishing safety nets for those contracts that can’t actively transition ahead of cessation. Strong adherence to the ISDA IBOR fallbacks protocol, in the US and UK in particular, has been encouraging. Clearing houses are also following suit with their own conversion processes on similar terms. We estimate over 97% of sterling interest rate derivatives have a robust safety net in place. [7] But more can and should be done – the protocol remains open for entities that have not yet adhered and it is critical that equally robust fallback arrangements are adopted in cash products too.
Page 7  Table 1: Changes in Global R* from structural and empirical models Structural model  Baseline Range  1985–2015  -1.9  (-3.3, -1.1)  Productivity growth -0.9  (-1.2, -0.3)  Population growth  -0.1  (-0.5, -0.0)  Longevity  -1.0  (-1.8, -0.8)  Empirical model  Median  5%–95%  1985–2015  -1.9  (-2.4, -1.3)  Of which:  Note: For the structural model, the table reports the estimate of Global R* in the baseline simulation, together with the minimum and maximum across the sensitivity tests. For the empirical model, the table reports the median estimates of Global R* together with the 95 percent posterior intervals. Source: Cesa-Bianchi et al. (2022). Table 1 shows that, in the structural model, Global R* falls markedly between 1985 and 2015. The total decline of 1.9 percentage points is driven by the response to the five global trends mentioned earlier. [9] The baseline structural model simulation matches the median change over the same period from the statistical model in the earlier chart (reported in the last row of the table), though both are subject to a wide range of uncertainty. [10] With respect to the main drivers of this decline, two factors – population ageing and a slowdown in productivity growth – play the largest roles in explaining the dynamics of Global R*. The productivity growth slowdown across advanced economies has been discussed extensively in existing work.