ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265. The tasks and responsibilities of ECB provided for in Guideline 2019/1265 are being updated with respect to the calculation and publication of compounded rates. The framework to consult stakeholders, which is provided for in Article 14 of the Guideline 2019/1265, is also being updated to enhance clarity. The amended guideline shall take effect on the day of its notification to the national central banks of the member states whose currency is EUR. The national central banks shall comply with the amended guideline at the latest from April 15, 2021.
The Benchmarks Regulation (2016/1011) necessitates the adoption of robust fallback provisions in a large number of financial contracts and instruments. In the absence of such fallback provisions, the possible discontinuation in the future of a critical benchmark such as EURIBOR, may have serious repercussions for the functioning of markets and, thus, for the implementation of monetary policy. Overnight rates compounded in arrears are one viable fallback option being recommended by FSB and market participants support the introduction of such rates. Thus, the publication of compounded rates based on historical €STR values by ECB can contribute to mitigating systemic risk in the scenarios of benchmark discontinuation, while promoting a wider use of the €STR and fostering consistency across major currency areas in the fallback options available to market participants.
Related Links
Keywords: Europe, EU, Banking, Securities, €STR, Interest Rate Benchmark, Benchmarks Regulation, Guideline 2019/1265, Fallback Provisions, EURIBOR, Compounded Rates, Guideline 2021/565, ECB
Previous Article
EBA Consults on Standards Related to FRTB-SANext Article
ESAs Publish Report on Activities of Joint CommitteeRelated Articles
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
SEC Extends Comment Period on Climate Risk Disclosures
The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.
APRA Reduces Committed Liquidity Facility, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.
CMF Consults on Basel Rules, Presents Roadmap to Address Climate Risks
The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.
PRA Issues Statement on NPEs and Policy on Trading Activity Wind-Down
The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.
EBA Updates Standards for 2023 Benchmarking of Internal Approaches
The European Banking Authority (EBA) updated the implementing technical standards that specify the data collection for the 2023 supervisory benchmarking exercise in relation to the internal approaches used in market risk, credit risk, and IFRS 9 accounting.
EIOPA Responds to Stakeholder Views on Blockchain in Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.