In June 2017, the Bank of England’s Working Group on Sterling Risk-Free Reference Rates published a White Paper entitled SONIA as the RFR and approaches to adoption.  The Working Group raises several issues of interest and recommends that the potential scope for the transition of legacy contracts which currently reference LIBOR to the Sterling Overnight Index Average (“SONIA”) be explored.

In concluding chapters of the White Paper, the Working Group invites suggestions of additional topics for discussion.  In response to this invitation and in light of the FCA’s recent announcement that, following end-2021, the FCA will no longer use its powers to persuade or compel banks to submit to LIBOR, the FMLC Chief Executive wrote to the Working Group to draw attention to the Committee’s previous comments on legal risk arising in the context of benchmark reform.  The letter makes a number of recommendations to ensure the smoothest possible transition to a replacement benchmark.

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