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
BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).
EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).
FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.
IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.
FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).
EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.
ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.
PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.
US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.