ISDA Outlines Results of Consultation on Pre-Cessation LIBOR Fallbacks
ISDA announced preliminary results of the consultation on implementation of pre-cessation fallbacks for derivatives referenced to LIBOR. The consultation took place from February 25, 2020 to April 01, 2020. The initial results indicate that a significant majority of respondents are in favor of including both pre-cessation and permanent cessation fallbacks as standard language in the amended 2006 ISDA Definitions for LIBOR and in a single protocol for including the updated definitions in legacy trades.
While the results are subject to further analysis, ISDA expects to move forward on the basis that pre-cessation fallbacks based on a "non-representativeness" determination and permanent cessation fallbacks would apply to all new and legacy derivatives referencing LIBOR that incorporate the amended 2006 ISDA Definitions. The updated definitions for other covered interbank offered rates (IBORs) will continue to include permanent cessation fallbacks only. A final report analyzing the consultation results and information on next steps will be available in the coming weeks.
ISDA has been working on an initiative at the request of the Official Sector Steering Group of FSB since 2016 to identify robust fallbacks for derivatives contracts that reference certain key IBORs. This request covered fallbacks that would take effect if an IBOR is permanently discontinued. ISDA conducted several industry consultations in 2018 and 2019 to finalize the methodology for fallbacks. One consultation on pre-cessation fallbacks was issued in May 2019, which resulted in a lack of consensus on the implementation of pre-cessation fallbacks. The recently published results are from the second ISDA consultation on pre-cessation fallbacks, which was published on February 25, 2020.
Related Link: Press Release
Keywords: International, Banking, Securities, Fallback Provisions, ISDA Definitions, IBORs, LIBOR, Pre-Cessation Triggers, ISDA
Previous Article
FSI Brief Examines Regulatory Responses to COVID-19 PandemicRelated Articles
BIS Innovation Hub Sets Out Work Program for 2021
BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.
EC Plans to Consult on Crisis Management and EDIS Framework Revisions
In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.
EBA Finalizes Remuneration Standards for Investment Firms in EU
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
ECA Recommends Actions to Enhance Resolution Planning for Banks
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA Proposes Rules on Identity Verification of Depositor Protection
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB Publishes Work Program for 2021
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA Issues Update on Move to New Data Collection Platform
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank Publishes Derivation Rules for Reporting by Banks
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
