FSB published the annual progress report on implementation of the FSB recommendations to reform major interest rate benchmarks. The report emphasizes that the continued reliance of global financial markets on LIBOR poses risks to financial stability; this calls for significant and sustained efforts by the official sector and by financial and non-financial firms across many jurisdictions to transition away from LIBOR by the end of 2021. The report covers progress from reforms to LIBOR, EURIBOR, TIBOR, USD, EUR, JPY, GBP, and CHF, in addition to the progress on the currencies in Australia, Brazil, Canada, Hong Kong, Indonesia, Mexico, Singapore, South Africa, and Turkey.
Interest rate benchmarks play a key role in global financial markets. In 2014, FSB recommended reforms for interbank offered rates (IBORs) in response to the cases of attempted manipulation and the decline in liquidity in key interbank unsecured funding markets. The report sets out progress on implementing the FSB recommendations and finds that:
- There is a common view across FSB jurisdictions that the use of overnight risk-free rates should be encouraged across global interest rates markets, where appropriate, and that contracts referencing IBORs should have robust fallbacks.
- There has been good progress in many derivatives and securities markets but transition in lending markets has been slower and needs to accelerate.
- Firms undertaking their transition away from LIBOR should not delay their programs until the emergence of possible forward-looking term versions of risk-free rates.
- The parallel efforts on transition across multiple jurisdictions and currencies are an opportunity to align conventions and other practices across currencies and products.
- Transition requires significant commitment from the official sector, working alongside market participants.
- Given the degree of risk arising from the continued reliance on LIBOR, regulated firms should expect increasing scrutiny of their transition efforts as the end of 2021 approaches
As part of its 2020 work program, FSB announced that it will conduct a survey of exposures to LIBOR and supervisory measures being taken to address benchmark transition issues, with the aim to improve collective understanding of LIBOR transition progress so far and to increase awareness of the importance of ensuring timely transition. In July 2020, FSB plans to deliver to the G20 Finance Ministers and Central Bank Governors , and publish, a report on the remaining challenges to benchmark transition.
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.
MAS published the guidelines on individual accountability and conduct at financial institutions.
APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.
SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.
FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.
ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.
OSFI published the key findings of a study on third-party risk management.
FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.