Featured Product

    ISDA Publishes Update on Global Interest Rate Benchmark Reforms

    August 05, 2019

    ISDA published its quarterly update in August 2019. This update highlights that progress has been made on benchmark reform and the focus is now on building liquidity and trading activity in the new risk-free rates. It also highlights that the work can move forward on finalizing and implementing the new fallbacks into derivatives contracts and reducing the systemic threat of a permanent discontinuation of LIBOR and other interbank offered rates (IBORs). Market feedback has now been sought on nine key IBORs in total, including US dollar LIBOR.

    As with the first consultation last year, the latest consultation asked market participants to opine on possible methodologies to adjust for structural differences between the IBORs and the risk-free rates that will replace them if a fallback is triggered. Following a request for proposal earlier this year, ISDA has now chosen an independent service provider to calculate and publish the adjustments. Ultimately, the ISDA definitions are expected to be amended before the end of the year to implement fallbacks for the nine IBORs that have beeen subject to consultation so far. An ISDA protocol will also be developed to enable firms to adapt legacy derivatives contracts.

    Going forward, a consultation on adjustments to the fallback for euro LIBOR and EURIBOR will be held after the alternative risk-free rate for euro (€STR) is published in October. There also remains an enormous amount of work to shift the market away from its use of LIBOR and other IBORs and to develop trading activity and liquidity in the alternative risk-free rates before the end of 2021. Given that the adjusted fallback will not match the relevant IBOR exactly, voluntary adoption of risk-free rates before any permanent cessation of an IBOR will be the preferable route for many. Nonetheless, the progress made on fallbacks is critical. This is a big step toward ensuring that derivatives markets are safer and more efficient by ensuring that a robust backup is in place if an IBOR permanently ceases to exist.

     

    Related Links

    Keywords: International, Banking, Securities, IBORs, LIBOR, EURIBOR, Interest Rate Benchmarks, Risk-Free Rates, €STR, Fallback, ISDA

    Related Articles
    News

    EC to Defer Application of SFDR Standards Till July 2022

    The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.

    July 23, 2021 WebPage Regulatory News
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Examines Asset Encumbrance in Banking Sector

    The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Publishes Methodological Guide to Mystery Shopping

    The European Banking Authority (EBA) published a methodological guide to mystery shopping.

    July 21, 2021 WebPage Regulatory News
    News

    APRA Issues Update on Capital Reform Policy Settings for Banks

    The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.

    July 21, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Assess Continuity Planning of Market Infrastructures

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.

    July 21, 2021 WebPage Regulatory News
    News

    ESMA Responds to Proposal Related to Sustainability Standards Board

    The European Securities and Markets Authority (ESMA) has responded to the IFRS consultation on targeted amendments to the IFRS Foundation constitution to accommodate an International Sustainability Standards Board (ISSB) to set IFRS Sustainability Standards.

    July 21, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7283