BoE Announces Use of SONIA in Place of LIBOR

On Monday, October 16th, the Bank of England (BoE) announced that it will start setting the Sterling Overnight Index Average (SONIA) rate, a replacement for LIBOR, on April 23rd, 2018.

A BoE working group approved SONIA as its preferred short-term interest rate benchmark following the recommendation earlier this year by a panel of banks of an alternative to LIBOR, according to a recent Business Insider article.

The SONIA index tracks the rates of actual overnight funding deals on the wholesale money markets, rather than relying on submitters like the LIBOR benchmark does, the article explains. SONIA's use will minimize "opportunities for misconduct," the BoE said at the time of the working group's decision.

The group chose the SONIA rate by a more than two-thirds majority "based on robust transaction volumes" and how well it measures overnight interest rates "that are considered close to risk-free."

SFIG has recently formed a LIBOR Task Force to discuss the potential impacts of LIBOR no longer being reported. The first item that the task force will respond to is the Federal Reserve Board's proposal to produce three new reference rates based on overnight repurchase agreement transactions secured by Treasuries. If you would like to join SFIG's LIBOR Task Force, please contact

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