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LONDON, Dec 18 (Reuters) - Bank of England Deputy Governor
Sam Woods said on Wednesday he would meet banks in the first
quarter of 2020 to check on whether regulations are hampering
their ability to ditch the use of the Libor interest rate
benchmark.
Banks were fined billions of pounds for trying to rig the
London Interbank Offered Rate and the Bank of England wants them
to switch to the central bank's Sonia overnight rate for pricing
financial contracts such as derivatives.
"We consider that the need to transition is a critical one
for all involved, and firms must take appropriate action now so
that they have transitioned to alternative rates ahead of the
end of 2021," Woods wrote in a letter to an industry working
group.
"I would like to suggest that we meet in spring 2020 to
consider how work on the regulatory interactions of benchmark
reform is progressing."
The working group has told Woods there are regulatory
impediments to moving away from Libor, including rules on
capital requirements.
Amending capital instruments to replace Libor with Sonia
could end up making them ineligible to be included in a bank's
capital buffer, the working group has said, warning that this
could result in a sudden drop in a bank's capital position.
Woods said in his response that it was not necessary to
reassess the eligibility of a capital instrument solely because
a different reference rate is used.
(Reporting by Huw Jones; Editing by Alison Williams and David
Clarke)
