More detailed material on both has been published this morning on our website. 10 In the rest of my remarks today, I want to take stock of progress so far, and explain how our new initiatives will work. Progress in sterling markets: derivatives instruments  As this ISDA audience will know well, by far the largest sterling LIBOR exposures come from derivatives positions – and progress here has been good. Swaps account for the lion’s share of sterling derivatives, by notional value – and last year approximately half of new cleared sterling swaps referenced SONIA. That’s some £ trillion a month. That ratio rose to more than two-thirds in January this year, amidst a sharp rise in trading of expectations on the outcome of that month’s monetary policy decision (Figure 2). That demonstrates the depth of liquidity in the market to absorb additional interest. But we can’t rest on our laurels – SONIA usage still needs to be higher. For some time there has been a sense that progress could be accelerated if a way could be found to overcome the potential ‘first mover’ challenge for intermediaries otherwise keen to switch. For that reason, and following consultation with the industry, the Bank and FCA have strongly encouraged market makers to use SONIA as the standard reference rate for sterling interest rate swaps from 2 March 2020 – that’s next Monday. From then, market makers should consider SONIA first.

We are working to identify and remove any unnecessary regulatory obstacles to transition, and clarify supervisory expectations.8 And we help provide international liaison and leadership through the Financial Stability Board’s Official Sector Steering Group, co-chaired by Andrew Bailey and John Williams. 6  www.fca.org.uk/news/speeches/next-steps-transition-libor www.bankofengland.co.uk/-/media/boe/files/financial-policy-summary-and-record/2019/december-2019.pdf See for instance www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2019/prudential-regulatory-framework-andlibor-transition.pdf and www.fca.org.uk/markets/libor/conduct-risk-during-libor-transition 7 8  3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  It is in that spirit that I want today to announce two new initiatives aimed at further supporting LIBOR transition:  -  First, and in direct response to feedback from market practitioners, the Bank is intending to publish a compounded SONIA index from July 2020. Complementing our existing overnight SONIA rate, the index will provide a flexible tool to help market participants construct compounded SONIA rates in an easy and consistent way, supporting achievement of their 2020 Q3 target for new issuance. -  The second relates to the Bank’s own lending operations for banks and other financial intermediaries. From October this year, we will begin increasing haircuts progressively on LIBOR-linked collateral we lend against. This will give firms the time they need to replace that collateral with risk free rate alternatives, ensuring their borrowing capacity is maintained while also protecting public funds. This approach reflects the clear preferences of respondents to our discussion paper last year.9  These initiatives are aimed at turbo-charging sterling transition, helping the market deliver against its commitment to transition away from LIBOR and further de-risking sterling markets.