arrangement should be permanent, or in what circumstances a change would be contemplated. i said then simply that the peg was for the time being the most appropriate monetary anchor for hong kong. i would give very much the same answer today. our peg is not a fixed rate that is supported by or dependent on discretionary intervention. it is a rulebased currency board system which imposes a particular discipline of adjustment through interest rate channels and domestic prices. it enjoys widespread support from international observers both in official circles and more widely. this is not just people being nice to us and choosing not to say anything which might rock the boat, although there may be one or two of them. rather it reflects an appreciation of the unique features of a currency board structure and the benefits which it has brought over 18 years, as well as an appreciation of the distinctive characteristics of the hong kong economy. the main distinctive characteristics to which i allude are the following : the flexibility in costs and prices, as discussed earlier ; the extreme openness of the economy in terms of both trade and capital flows ; the constitutional commitment, through the basic law, to support the free movement of capital and not to operate exchange controls ; and the soundness of the banking sector. taken together, these factors help explain why a peg may be feasible and sensible for hong kong while it might not be so for others. this does not mean that hong kong would be incapable of operating or continuing to prosper under an alternative regime. indeed, we possess the necessary infrastructure to conduct discretionary monetary policy ( although that was not the case back in 1983 ), and i am confident that my colleagues would be quite capable of meeting the challenge of any new, more activist regime. however, although there may be moments when one thinks " if only we had a floating rate, things wouldn't be so bad right now ", one cannot chop and change between regimes to suit short - term expedience. we acknowledge that no system is perfect, but i have suggested that much criticism of the peg may be exaggerated, or even unfounded. we would need to be well satisfied that an alternative would be unequivocally superior, before ditching something which has been the cornerstone of internal financial stability and external confidence for over 18 years.

important libor transition. urgency of the libor transition 10. as we all know, time is running short, and end - 2021 is fast approaching. now, with a clear and certain timetable for libor cessation, we should all work together with a sense of urgency. although certain us dollar libor settings will continue to be published until endjune 2023, this 18 - month extension is intended to allow time for more legacy us dollar libor contracts to mature. and, this won ’ t alter the fact that – libor will come to an end. it is therefore vital for us to continue our preparation that is currently underway, and avoid any further build - up of libor - related exposures going forward. with that in mind and to smoothen the transition process, we expect banks in hong kong to cease to issue new libor - linked contracts by the end of this year. development of the hkd overnight index average ( honia ) linked market 11. as we have stepped into the fourth quarter, we will soon move into a post - libor world. as we look ahead, libor transition also brings with it markets relating to the new risk - free rates ( rfrs ), like secured overnight financing rate ( sofr ). according to isda ’ s transition to rfrs review published in august, trading activity in sofr - linked otc interest rate derivatives ( ird ) continued to grow in q2 this year, with the traded notional of sofr - linked ird increased by 22 % to us $ 932 billion from us $ 762 billion in q1 2021. going forward, these new market segments will no doubt have further room to grow. 12. closer to home in hong kong, we are adopting a multiple - rate approach, under which both hong kong interbank offered rate ( hibor ) and honia are expected to co - exist. in line with the market development efforts across the world, we are taking active steps in promoting the further development of the honia - linked market. to facilitate the adoption and usage of honia, we are planning to issue honia - indexed floating rate notes ( frns ) under the government bond programme later this year. we hope the proposed frn issuance could encourage the private sector to consider issuing similar products in the future, and provide further impetus for the development of other honia - linked instruments in hong kong. 2 / 4 bis central bankers'speeches sustainable finance