howard lee : benchmark regulation and migration closing keynote by mr howard lee, deputy chief executive of the hong kong monetary authority, at the bloomberg - isda benchmark conference " benchmark regulation and migration ", hong kong, 30 may 2019. * * * taran [ khera ], ladies and gentlemen, 1. first of all, i would like to thank bloomberg and isda for organising this benchmark conference and for gathering so many speakers and participants to exchange views on the important subject of benchmark reform. the subject of benchmark reform is always very close to my heart, as i have been involved in the review of interest rate benchmarks both in hong kong and in the context of the financial stability board ’ s official sector steering group ( fsb ossg ) deliberations for many years. libor discontinuation : a turning point 2. if we look back to 2013 when the ossg started to operate, there was a general agreement that given the changes in the interbank market, the interbank offer rates, or ibors in short must be reformed. but given the long history of ibors and the huge value of financial contracts referencing them, moving to new ibors with fundamentally different determination methodologies, or switching to alternative reference rates is a very complex task, as we heard from many speakers just now. understandably market participants generally took a ‘ wait - and - see ’ approach when dealing with benchmark transition issues. but now – with a growing recognition that libor may discontinue after end - 2021 – the situation is changing. this is an important wake - up call for the financial market, and market participants are spending a lot more efforts on the transition issues, with the support of isda and other industry bodies. 3. but, with this growing momentum, are we all geared up? i would reply with a simple ‘ no ’. clearly, much more remains to be done. transition : a challenging process even for the deep usd market 4. among all the ibors, usd libor is the most widely used benchmark in the global market. and the us authorities have been proactively engaging with the industry in promoting the use of secured overnight financing rate ( sofr ) as an alternative. 5. since the launch of sofr in april 2018, the trading volume of interest rate derivatives ( ird ) referencing sofr has been growing, but it remains relatively small. according to isda ’ s interest rate bench

participants as a credible and reliable benchmark. similar to a few other jurisdictions in the region, hong kong will adopt a multiple - rate approach. in other words, honia and hibor will co - exist in the market and market participants are free to choose between them. meanwhile, tma will continue to strengthen hibor to ensure that it remains in compliance with international standards. 20. of course, we are facing the irony that if hibor remains, market players may see little incentive to develop and trade honia - based products. however, i encourage all market participants to start exploring how to incorporate honia into their business. it may be true that hibor will last for some more time. but the transition to sofr in the usd space could gradually lead to changes in market practices and conventions that may eventually shift market preference for interest rate benchmarks. therefore, if more honia - based products can be introduced in the market going forward, it would help reduce any market impact in 3 / 4 bis central bankers'speeches case hibor has to discontinue one day owing to changes in market circumstances. closing 21. ladies and gentlemen, as we have learned from speakers earlier this morning, interest rate benchmark reform is complex, but it is something too important for any market participant to ignore. when libor ceases to exist, there will certainly be an impact on global financial markets. some people may say end - 2021 seems a long way off. but it ’ s not, given the tremendous amount of preparatory work required to ensure a smooth transition. no one in the market can afford to play a waiting game. let ’ s all devote resources now, and work closely together on this important task. 22. thank you. 4 / 4 bis central bankers'speeches