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
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).