is now in excess of 90 % sonia. these positive developments in linear derivatives ( e. g. interest rate swaps ) have filtered through into more complex derivative markets, with sonia swaptions, caps and floors widely available and infrastructure being put in place to support these products. today is a further landmark, with another ‘ sonia first ’ initiative as the interdealer market looks to shift liquidity in these more complex non - linear products from libor to sonia ahead of the upcoming end - q2 milestone to cease new libor linked issuance. [ 4 ] this is not to say there is an outright ban on trading libor in nonlinear sterling markets after this milestone. in line with our consistent message of supporting a smooth transition there is a ‘ risk management ’ exemption to help firms support their clients as liquidity in libor decreases and end users actively transition to more robust alternatives. i will, however, offer a warning to those firms regulated by the prudential regulatory authority ( pra ) who may be guilty of what i ’ ll call ‘ lazy ’ behaviors in unnecessarily sustaining libor linked contracts. uk supervisors have been consistent and clear that they support the industry - agreed milestones of the rfrwg and have set their expectations in line with these. across regulated firms the necessary reporting is in place and your supervisors will be speaking to you. the transition away from libor is a risk management issue and relevant senior managers in firms will be responsible for ensuring suitable policies and oversight are in place. firms regulated by the pra in the uk that fail to prudently manage transition will be treated in the same way as firms demonstrating any other risk management / governance failings. as in other jurisdictions, lending markets have presented their own challenges. market conventions and relevant infrastructure to support the use of overnight rates have been slower to settle and implement. but the industry and authorities have worked through these challenges together, and we see overnight sonia compounded in arrears is now being actively used across billions of pounds of gbp facilities. [ 6 ] this includes bilateral, syndicated and multicurrency deals across a wide range of domestic and international users spanning a large range of commercial sectors. similar to the experience in the gbp bond markets, compounded in arrears rates have quickly established themselves as a robust and useable market standard. they offer borrowers a transparent rate based on substantial volumes of real transactions and lenders a durable rate that will function through a range

actions we have taken on loss absorbency are designed to create the right oversight incentives for shareholders and bondholders by literally putting them at risk of loss. this will without doubt have an effect on culture. i want to end with a few broader reflections on the role of culture. the basic difference between the role of the regulator and management of firms is that our objective is framed exclusively in terms of the public interest. for firms, it is important to recognise that a sustainable and viable business model is one that provides an acceptable rate of return to those who take the risk of providing the necessary loss absorbing capacity, typically its risk capital. firms exist to service customers who make up the public interest, which of course means that service includes the notion of not exploiting customers, a value one might expect to be given in an organisation ’ s culture. today, the public perception of banking, and some other areas of finance, remains too much towards the exploitative “ greed is good ” end of the spectrum. major changes have occurred since the crisis which have improved behaviour in firms, but public opinion broadly does not recognise these developments and tends to think that nothing has changed. culture is an important part of demonstrating that change. now, i do see evidence of that change happening, and a big challenge for all of us, regulated and regulator is to do all that we can to keep pushing that change forward. in some cases i think there should be greater clarity in terms of the outcomes that firms are seeking from the bis central bankers ’ speeches changes they make, how progress is assessed and whether there is sufficient consistency across the organisation. these are all points that i know from my discussions with them are in the sights of colette bowe and alison cottrell and their colleagues at the banking standards board, and i welcome the work they are doing. it is of course very reasonable to ask what as regulators we can do to further the goal of restoring trust through strong culture. i have set out what i see as the important role of the senior managers regime. going beyond that, in the pra from the outset we have emphasised that we are a forward - looking supervisor of firms, and at the heart of our approach is the application of judgement set against a framework of rules. we cannot write a rule to take care of every situation that may occur, and as a forward looking supervisor we are applying judgement in conditions of uncertainty about the future. how firms deal with the uncertainty of the future will also shape their culture