ISDA published a statement from the Chief Executive Officer Scott O'Malia on the work planned for 2020. He highlighted that the past 12 months have been busy, but 2020 will be even more crucial with respect to certain issues facing the industry. In 2020, ISDA "will be working hard to develop and roll out solutions" to help in implementation of benchmark reform, initial margin requirements, and local implementation of revised Basel rules under the Fundamental Review of the Trading Book (FRTB).
The planned tasks for 2020 include the following:
- Benchmark reform will remain a key priority and ISDA will continue to support industry efforts to shift from interbank offered rates (IBORs) to risk-free rates in the run-up to end-2021, the date the UK FCA has said it will no longer persuade or compel banks to make LIBOR submissions. ISDA will finalize amendments to the ISDA Definitions to incorporate robust fallbacks for nine key IBORs and will publish an ISDA protocol to enable market participants to include fallbacks within legacy IBOR contracts in the first quarter of 2020; these documents will take effect three months later.
- ISDA will focus on advocating for consistent implementation of the BCBS/IOSCO changes to the initial margin framework this year, including an extension of the phase-in schedule for the smallest firms until 2021 as well as helping members with implementation. As part of this, ISDA will continue to maintain and enhance the ISDA Standard Initial Margin Model and ISDA Create, an online platform for the negotiation and execution of documentation.
- ISDA will monitor how the Basel III rules (such as FRTB, the leverage ratio, and finalization of the standardized approach to counterparty credit risk by US agencies) are applied in each jurisdiction and will focus on implementation solutions. ISDA is working on an initiative to support accurate, efficient, and consistent implementation of the standardized approach under the FRTB.
- With the timing of Brexit a little more certain after the UK election, ISDA will continue to identify issues that market participants need to consider and will work to mitigate the impact on the derivatives market to the extent possible. An important part of that will be advocating for continuity in clearing and trading—for instance, via equivalence determinations between EU and UK and the recognition of each other’s central counterparties and trading venues. ISDA will continue to highlight the need for closer cross-border cooperation and harmonization globally to prevent fragmentation of markets, while encouraging regulatory interest in finding technical solutions if political circumstances are challenging.
- ISDA wants to make all its definitions and legal documents digital to create efficiencies and drive automation—and 2020 will see a big step in that direction. Work is underway to develop a taxonomy and clause library related to the ISDA Master Agreement, which will introduce greater standardization in the way firms negotiate and agree certain contractual terms. ISDA is also working to update its 2006 ISDA Definitions, with the aim of creating a digital version.
Related Link: News Release
Keywords: International, Banking, Insurance, Basel III, Benchmark Reforms, Initial Margin, ISDA Definitions, IBOR, ISDA Create, Brexit, Fintech, Derivatives, ISDA
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.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
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.
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.
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.
The European Banking Authority (EBA) published a methodological guide to mystery shopping.
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.
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.
The Bank of England (BoE) published questions and answers (Q&A) on OSCA to BEEDS migration for statistical reporting as well a presentation from the project overview session held with statistical reporters.
The Basel Committee on Banking Supervision (BCBS) is consulting on a technical amendment to the Basel Framework to reflect a new process reviewing the global systemically important bank (G-SIB) assessment methodology.