work that we will talk about today will help, but we have to acknowledge that the transition will be complicated. unfortunately, as i have discussed, we cannot guarantee that it won ’ t be necessary. the most complicated aspects involve the legacy contracts that reference libor, many of which do not have strong language in place if libor were to stop publication. the fsb has been working with the international swaps and derivatives association ( or isda ) to devise better language for derivatives, and isda ’ s scott o ’ malia and katherine tew darras will discuss that work later this morning. as people now consider the risks around libor for other types of contracts, they will need to go through their documentation to understand what the fallback language is and how it can be improved. we will also discuss those issues today. this is important work, both for the parties to these contracts and for our financial stability. while there may be no perfect contract language or fallback, good risk management requires that we work together to find language and fallbacks that are robust and that limit unintended valuation changes. so, while much work has been done, there is more still to do. i have been heartened in seeing that many market participants are already confronting these issues. for some, andrew bailey ’ s speech was a difficult wake - up call. but the efforts we have undertaken with the arrc show what is possible when the official sector works collectively with market participants. if market participants are willing to continue to work together, then we can safely achieve the transitions needed to create a better and more robust system that will help to ensure our ongoing financial stability. figure 1 : distribution of daily unsecured funding volumes of the g - sib firms post money - market reform percent of days with observed volume one - month funding volumes 12 % median 10 % 8 % 6 % 4 % 2 % 0 % $ 100 million $ 500 million $ 1. 0 billion percent of days with observed volume 14 % $ 1. 5 billion $ 2. 0 billion $ 2. 5 billion $ 3. 0 billion $ 3. 5 billion $ 4. 0 billion $ 4. 5 billion three - month funding volumes median 12 % 10 % 8 % 6 % 4 % 2 % 0 % $ 100 million $ 500 million $ 1. 0 billion percent of days with observed volume 18 % $ 1. 5 billion $ 2. 0 billion $ 2. 5 billion $ 3. 0 billion $ 3. 5

here include all of the eurodollar, federal funds, cd, and commercial paper transactions that the federal reserve has access to - - the most complete picture of u. s. dollar unsecured funding that i am aware of. for one - month funding, shown in the top panel, the median daily volume of transactions by these banks since money - market reforms took effect last year was just over $ 1 billion. for three - month funding ( the middle panel ), the most heavily referenced libor tenor, the median is less than $ 1 billion per day. on some days we see less than $ 100 million. if we compare this to the more than $ 100 trillion in outstanding volumes of u. s. dollar libor contracts, it should be clear that the activity in this market is miniscule compared to the size of the contracts written on it. in our view, it would not be feasible to produce a robust, transaction - based rate constructed from the activity in wholesale unsecured funding markets. a transactions - based rate from this market would be fairly easy to manipulate given such a thin level of activity, and the rate itself would likely be quite volatile. thus, libor seems consigned to rely primarily on some form of expert judgment rather than direct transactions. as we discussed these issues with the officials in the united kingdom who oversee and regulate libor, we also became aware that they were receiving a steady stream of requests, and sometimes demands, from banks seeking to leave the libor panels. the use of expert judgment in submissions allows libor to be published every day, but many banks are now understandably uncomfortable with being asked to provide judgment about something that they do very little of. in his july speech, andrew bailey discussed the efforts of the fca to keep these banks on the panels. market participants should understand that the official sector has done everything it can to stabilize and strengthen libor. without the intervention of u. k. authorities, libor would be in a weaker state today. but that balancing act has grown increasingly difficult. as time has passed, some banks have grown more resistant to public - sector entreaties to remain on the panels. as you know, one bank left the u. s. dollar panel last year. at the same time, we have had to confront the fact that, if banks could not be persuaded to voluntarily remain on panels, then the legal powers to compel them to do so were limited. under european union