Guy Debelle: Progress on benchmark reform

Keynote speech by Mr Guy Debelle, Deputy Governor of the Reserve Bank of Australia, at the at the International Swaps and Derivatives Association (ISDA) 34th Annual General Meeting, Hong Kong, 11 April 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good morning and thanks to ISDA for the opportunity to speak here today.

It has been almost two years since Andrew Bailey announced that the FCA (the UK Financial Conduct Authority) would no longer use its powers to sustain LIBOR (the London Inter-Bank Offered Rate) beyond 2021. Since that time, preparing for the end of LIBOR has been a key challenge for the global finance industry. Today I will provide an update on the progress with benchmark reform internationally, and highlight some of the key issues in the Asia-Pacific region.

The End of LIBOR

There is now widespread recognition that LIBOR will come to an end. The fundamental problem is that there are not enough transactions in the short-term inter-bank market to underpin LIBOR. The banks that make the submissions that are used to calculate these benchmarks are uncomfortable about continuing to do this, as they have to mainly rely on their 'expert judgement' rather than actual transactions. To prevent LIBOR from abruptly ceasing to exist, the FCA has received assurances from the current banks on the LIBOR panel that they will continue to submit until the end of 2021. But beyond that point, there is no guarantee that LIBOR will survive. The FCA will not compel banks to provide submissions and the panel banks may choose to stop.

Financial regulators around the world expect institutions using LIBOR to be ready to transition to more robust benchmarks.