and further de - risking sterling markets. more detailed material on both has been published this morning on our website. 10 in the rest of my remarks today, i want to take stock of progress so far, and explain how our new initiatives will work. progress in sterling markets : derivatives instruments as this isda audience will know well, by far the largest sterling libor exposures come from derivatives positions – and progress here has been good. swaps account for the lion ’ s share of sterling derivatives, by notional value – and last year approximately half of new cleared sterling swaps referenced sonia. that ’ s some £4 trillion a month. that ratio rose to more than two - thirds in january this year, amidst a sharp rise in trading of expectations on the outcome of that month ’ s monetary policy decision ( figure 2 ). that demonstrates the depth of liquidity in the market to absorb additional interest. but we can ’ t rest on our laurels – sonia usage still needs to be higher. for some time there has been a sense that progress could be accelerated if a way could be found to overcome the potential ‘ first mover ’ challenge for intermediaries otherwise keen to switch. for that reason, and following consultation with the industry, the bank and fca have strongly encouraged market makers to use sonia as the standard reference rate for sterling interest rate swaps from 2 march 2020 – that ’ s next monday. from then, market makers should consider sonia first. www. bankofengland. co. uk / - / media / boe / files / paper / 2019 / the - boes - risk - management - approach - to - collateral - referencing - libor - for - use - inthe - smf www. bankofengland. co. uk / speech / 2020 / andrew - hauser - isda - sifma - amg - benchmark - strategies - forum - 2020 all speeches are available online at www. bankofengland. co. uk / news / speeches figure 2 : sonia vs libor linked trading flow volumes ( january 2020 ) floating rate notes * * swaps futures sources : bloomberg finance l. p., cme group, curveglobal, ice and lch group * incremental increase in january 2020 from average sonia flows in 2019 * * maturing post - 2021 this should put the brakes on further increases in the stock of sterling libor swaps maturing beyond 2021 – a metric the fpc

orientation of monetary policy, i have reached the conclusion that the current monetary policy stance is appropriate at the present juncture. v ladies and gentlemen, let me now try to summarise the main features of the interdependence between monetary policy and financial markets : · central banks need well - functioning financial markets. they work as the crucial link between monetary policy - setting and its ultimate goal, price stability. disintermediation further heightens the importance of financial markets in the transmission mechanism of monetary policy. therefore, monetary policymakers need to analyse structural changes in financial markets thoroughly. · central banks acquire information about the expectations of financial market participants by monitoring financial market prices. they cross - check their own forecasts against these data. · finally, in order to avoid misperceptions of the policy stance in the markets, there has to be a consistent communication policy. with capital markets integrating and habits in the fields of finance and investment changing, as central bankers in the euro area we have now entered a period of heightened uncertainty. the ecb has opted for a monetary policy strategy that anchors the markets ’ expectations of future price stability. the twopillar approach to assessing the outlook for prices is appropriate in times of structural change, as it is not only credible, but also highly flexible. financial markets therefore have a reliable partner in the eurosystem – one that is well equipped to meet current and future challenges.