christopher kent : benchmark reforms remarks by mr christopher kent, assistant governor ( financial markets ) of the reserve bank of australia, at the australian securitisation forum virtual symposium, sydney, 17 november 2020. * * * introduction thank you for the opportunity to speak at the asf symposium again this year. benchmark reform is a critical issue to all of us since it will help to underpin the healthy functioning of financial markets. much work has already been done in this area, but much remains to be done in the year ahead as we look to transition away from libor. i ’ ll spend a bit of time reviewing the work ahead of us. a key aspect of this is the adoption of fallbacks. while these are an important part of the libor transition, they also should be in place for a much wider range of financial contracts, including those that reference bbsw. the end of libor the end of libor is a certainty. it is critical that australian institutions – both sell - side and buyside – are ready for this by no later than the end of 2021. institutions need to have done one of two things. they can transition away from libor by using alternative reference rates. or, for contracts where that ’ s not possible, they can ensure that robust fallback provisions are in place. doing either one will provide certainty about the replacement rate when libor ends. institutions that continue using libor beyond the end of next year face significant legal, operational and reputational risks. when libor ends, any firms with contracts still referencing libor – and without fallbacks in place – will face contractual disputes, litigation and frustration. there is the potential for this to lead to a firm facing financial and operational disruptions. any such firms then risk disrupting financial markets more generally. so we all need to get our respective houses in order. the state of readiness for the libor transition is something that the rba, asic and apra are all watching closely. asic and apra have supervisory responsibilities in this area and associated powers to pursue if needed. our current assessment is that australian firms have made progress on the libor transition to date. there is, however, variation across firms and continued focus and effort is needed in the year and a bit that remains. the financial stability board ( fsb ) has recently published a global transition roadmap for libor putting a timeline on the steps involved that you should be aiming to meet. 1 in particular

however, is not to rule out means testing in principle, but to wage a more effective campaign against tax evasion. i also recognize that a wider application of such testing might make only a relatively small contribution to the correction of the fiscal imbalance. but it would be highly symbolic in that it would send a powerful message about the need for change to a citizenry which firmly believes that public goods and services can be had for “ free ”. the truth is that there is no free lunch – somebody must pay for it! let me give you two topical examples. first, take the park and ride scheme. the popular impression is that it is free. this, however, is not correct. what is happening is that people who use the scheme are getting a free ride at the expense of those who do not use it. had the latter been consulted, they might well have preferred to see their taxes put to a different use. the other example comes from new york. defending his proposal to introduce a congestion charge for vehicles entering manhattan, mayor bloomberg is reported to have said that the question was not whether people wanted to pay, but how they wanted to pay : whether through a higher incidence of respiratory and other diseases and increased health care costs, or by reducing the number of polluting vehicles in the city and using the money collected through the charge to improve public transport. the central bank of malta raised its central intervention rate twice last year and again in january. wasn ’ t this risky for an economy finally showing growth? the primary objective of the bank ’ s monetary policy is price stability. as is typical for small, open economies, however, the bank does not target inflation directly. instead, the bank pursues this objective by using the exchange rate as its intermediate target and the level of the external reserves as its operational target. in the absence of capital controls, interest rates on the maltese lira are inevitably influenced by those offered by the currency to which it is pegged, the euro. it follows, therefore, that in an environment of rising interest rates abroad, domestic rates must also rise in order to maintain a premium over euro rates, and thus protect the maltese lira by making domestic financial assets more attractive, thus discouraging capital outflows. that is why under fixed exchange rate regimes, the state of the economy cannot be a primary consideration. having said that, it must be pointed out that the two objectives are not mutually exclusive. indeed, since a prudent monetary policy stance