Sonia Reforms in April 2018 – BoE

The Bank of England has formally announced that its reforms to the Sonia interest rate benchmark will take effect on Monday 23 April 2018. 

The reforms, which were announced earlier this year and see Sonia replace Libor as the interest rate benchmark for UK markets, will result in the Bank of England taking on the end-to-end administration, including the calculation and publication of Sonia; the coverage of Sonia being broadened to include overnight unsecured transactions negotiated bilaterally as well as those arranged via brokers, using the Bank’s Sterling Money Market Data Collection as the data source; the averaging methodology for calculating Sonia changing to a volume-weighted trimmed mean; and the publication of Sonia moving to 09:00 on the business day following that to which the rate pertains.

Friday 20 April 2018 will be the final day for which Sonia will be calculated and published by the WMBA using the current methodology. For the rate pertaining to Monday 23 April, Sonia will be calculated by the Bank using the reformed methodology and published at 9am on Tuesday 24 April; no data will be published on Monday 23 April. 

The bank has also published data showing that over the last six months, reformed Sonia continues to be around 1.3 basis points below current Sonia, calculated on average daily volumes of around £46 billion, over three times larger than those underlying current Sonia. 

Following the implementation of the reforms the Bank will publish an assessment of its compliance with IOSCO’s Principles for Financial Benchmarks.  An assurance report produced by EY will be published alongside this.

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Colin Lambert

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