Not only will this increase the efficiency of those compression mechanisms, reducing the system-wide gross notional position, it will also reduce operational and counterparty risks for the system as a whole through the increased use of clearing. An infrastructure forum held at the Bank earlier this year revealed substantial interest from firms across the sterling markets to exploit these opportunities.9  For example, this removes so-called ‘stub risks’ which arise from the potential for interest rates to change during the period covered by term fixings, typically of say, 3 or 6 months in the case of common LIBOR swaps. 6 See for instance https://www.risk.net/derivatives/6726026/abp-noteholders-agree-frn-change-from-libor-to-sonia and https://www.rbs.com/rbs/news/2019/06/natwest-to-offer-markets-first-sonia-loan.html 7 The global FSB also recently issued a ‘user guide’ designed to show the potential benefits of linking new business to daily risk free rates, available at: https://www.fsb.org/wp-content/uploads/P040619-1.pdf 8 https://www.bankofengland.co.uk/-/media/boe/files/markets/benchmarks/statement-on-the-progress-on-adoption-of-risk-free-rates-insterling-markets.pdf?la=en&hash=24893EB812640CC61E640BEB98D8E7415439210B 9 Material from this event on 31/01/19 is available at https://www.bankofengland.co.uk/markets/transition-to-sterling-risk-free-rates-fromlibor 5  9  All speeches are available online at www.bankofengland.co.uk/news/speeches  9  These observations illustrate only a small fraction of the ways in which transition away from LIBOR will change the landscape of sterling markets for the better. They are benefits for the market, and the economy, as a whole. But those who get there first stand to gain the most. Intermediaries, lenders and infrastructure providers who win the race to be ready to transact in SONIA, or develop and market innovative SONIA-based products, are more likely to be rewarded with larger syndicate shares, stronger and more remunerative loan growth, or more favourable flow revenue.

Join the revolution! Why it makes business sense to move on from LIBOR  Speech given by Andrew Hauser, Executive Director, Markets  At Risk Live, London 27 June 2019  I am grateful to Wayne Leslie for his help in preparing this speech, and to Peter Balint, Rohan Churm, Tom Horn, Al Hughes, Antoine Lallour, Adeshini Naidoo, Will Parry, Edwin Schooling Latter, Jugvinder Singh, Tim Taylor and Francesca Zwolinksy for their advice and comments. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  Introduction  There seem to be two rather distinct themes to your conference today:  The first is all about opportunity, the future, things you might want to do: fintech, AI, new tools and ways of working. All symbolised by a rather inspiring yellow lightbulb icon on your agenda:  The second is all about the grim stuff: black swans, operational risks, or whatever else might lurk in your ‘hall of horrors’ sessions later – and the things you have to do in response. I’m not 100% sure which camp this speech has been put in. But I think there’s a clue in the icon you’ve put next to my name in the programme – which is a revolutionary clenched fist… In one sense I understand why I’ve been given a pugnacious icon. The programme to move the market from LIBOR to risk-free rates is a huge undertaking. Its goal is vital, and simply stated: to eliminate the profound system-wide vulnerabilities posed by LIBOR. And the deadline is clear: end-2021.