Nobody disputes that in the long term it is in the best interest of our countries to adopt euro, as it heightens the degree of business cycle correlation and market integration. However, the benefits of euro adoption are not unconditional; therefore it is essential to make sure that nominal convergence criteria are achieved on a sustainable basis. Also it is important to attain a certain degree of per capita income convergence before switching to the euro (a large convergence gap may complicate business cycle management in the absence of independent monetary policy). Additionally, it is important to demonstrate the effectiveness of the new institutional setup in preventing and dealing with pending imbalances and that alternative policy instruments exist in order to take over from monetary policy in case corrections are needed. This is why recent years’ experience has substantially altered the approach to euro adoption. Before the crisis, the opinion prevailed that meeting nominal criteria was enough to prove the eligibility for the euro adoption. Some economists even debated the excessive severity of the nominal criteria and the conflict between their fulfilment and real convergence progress (Buitter and Grafe, 2002; Szapary, 2001; Kopits, 1999; Rostowski, 2002). But during and after the crisis, it became obvious that the Maastricht criteria are not enough to ensure successful EA membership. Nominal convergence criteria cannot be sustainably met unless competitiveness, financial stability and solid fiscal equilibrium are ensured. “The bigger picture”, meaning the Macroeconomic Imbalance Procedure, gained ground and real convergence criteria came to the forefront.

And it’s true that the regulatory authorities have stressed that firms’ boards and executives must take ownership of the transition and its key milestones, through ‘Dear CEO’4 and ‘Dear Senior Manager’5 letters, and through direct supervisory  1  You can see this vividly in the charts at: www.theice.com/iba/historical-data www.bankofengland.co.uk/-/media/boe/files/markets/benchmarks/rfr/rfrwgs-2020-priorities-and-milestones.pdf This target refers to products maturing beyond 2021 4 Dear CEO letter: www.bankofengland.co.uk/prudential-regulation/letter/2018/firms-preparations-for-transition-from-libor-to-risk-freerates and feedback: www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/publication/2019/firms-preparations-for-transitionfrom-libor-to-risk-free-rates.pdf 5 www.bankofengland.co.uk/prudential-regulation/letter/2020/next-steps-on-libor-transition 2 3  2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  engagement. The FCA has set out how it will exercise its powers of life and death over LIBOR, including the critical judgment on representativeness.6 And the Bank’s Financial Policy Committee (FPC) has said that it will consider using other policy and supervisory tools to encourage transition if progress is too slow. 7  FIGURE 1: Sterling Risk Free Rate Working Group roadmap for 2020  But the public sector has ‘carrots’ too – and we are doing at least as much to encourage and enable sterling transition as we are to enforce it. The Bank of England has been producing SONIA, the market’s chosen risk-free rate, on a daily basis since 2018. With the FCA, we provide the secretariat for the Working Group, helping market participants to identify common goals and targets. We regularly gather structured market-wide information on progress – first through the ‘Dear CEO’ process and more recently by initiating a regular data collection exercise – and we use it to provide feedback on risks and share good practices.