, a benchmark based on such shaky foundations will collapse. just like hammersmith bridge. only it won ’ t be a few thousand disadvantaged families, it could be the entire global financial system that suffers, with unimaginable consequences. we can ’ t let that happen. and that ’ s why, for the past six years, we ’ ve been doing two things : - first, we ’ ve been constructing a new bridge. for sterling borrowers, that bridge is built on the foundations of sonia – the sterling overnight index average, produced every day by us at the bank of england and based – unlike libor – at around 60 billion pounds of real, daily transactions1 ; - and, second, while that work has been underway, we ’ ve shored up the old libor bridge, through the fca ’ s agreement with libor panel banks to continue providing submissions to the benchmark. but those repairs were only ever temporary. the fca can ’ t replace those markets that used to underpin libor submissions : they are gone forever. and the fca ’ s agreement with the panel banks runs out at the end of 2021. from 2022, therefore, the availability of libor cannot be guaranteed. something that is unsafe today will become lethal at the end of next year. the sterling overnight index average ( sonia ) is administered by the bank and reflects the average of the interest rates that banks pay to borrow sterling overnight from other financial institutions see www. bankofengland. co. uk / markets / sonia - benchmark. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice avoiding that outcome is what we ’ re here today to discuss. but before we dive into the detail i want to leave you with three key messages : - first, libor transition affects every company that borrows in sterling. you cannot ignore it, or hope that it goes away : you need to act well before the end of 2021. - but, second, there is time if you start now. that new bridge i mentioned a moment ago is up and running. by the end of this month, all lenders should be ready to offer you products linked to sonia or another non - libor rate. six or twelve months ago, that wasn ’ t universally true. now it is. but don ’ t just take my word for that. ask national express, which took out one of

reliable conclusions to be drawn as to the risk distribution after the credit risk transfers. it can be concluded, though, that credit risks are borne by a larger number of market players than previously and that diversification possibilities are probably better utilised nowadays. in interbank business, too, more attention is being paid worldwide to default risks. a growing share of interbank business is hedged ; this is also the case in switzerland, where repo business has developed steadily. unhedged transactions still clearly account for the bulk of interbank business, but with an average volume of approximately sfr 20 billion, interbank repos, which were neglected for a long time, have grown to a respectable size. with respect to system stability, this development is favourable and should be further promoted. continuous linked settlement ( cls ) as regards credit risks in foreign exchange business, the launch of the cls system this autumn is a milestone achievement. cls bank, which has its headquarters in new york, serves as a platform to eliminate the so - called herstatt risk, i. e. the settlement risk inherent in foreign exchange deals. previously, the two legs of a foreign exchange transaction were settled at different times. if us dollars were bought against swiss francs, the franc amount was to be paid during european trading time. the corresponding amount in us dollars, however, was credited only a few hours later – during us trading time. in the few intervening hours, a credit risk existed. if a bank had been closed down during this time period, its counterparties might possibly have lost huge amounts of us dollar receivables. cls bank now makes it possible to settle foreign exchange transactions in the major currencies based on the « payment versus payment » principle, thereby eliminating the settlement risk for these transactions. currently, 42 financial institutions are directly linked to the system ( settlement members ) and settle their foreign exchange payments via cls in seven different currencies. one of these settlement currencies is the swiss franc. three swiss banks – ubs, cs and zurcher kantonalbank – participate in cls. apart from these three swiss banks, two other financial institutions – hsbc and bank of america – effect foreign exchange transactions in swiss francs via cls. every day, these five institutions together enter around 1, 400 payments in the amount of almost sfr 20 billion into cls. settlement takes place via a direct link between the swiss interbank clearing system ( sic )