Featured Product

    EIOPA Publishes Discussion Paper on IBOR Transitions

    February 06, 2020

    EIOPA published the discussion paper on interbank offered rate (IBOR) transitions. This discussion paper addresses, for the first time, the subject of the ongoing changes to the new benchmark rates, along with the issues identified in the EIOPA risk-free rate environment. The comment period for this paper is open until April 30, 2020. Based on the feedback received to this discussion paper, EIOPA will launch a consultation, which will include specific policy recommendations on the subject of IBOR transitions.

    The focus of this discussion paper is to address the issues identified with the EIOPA risk-free rate methodology and the EIOPA risk-free rate production and to propose solutions and options for consideration. The paper highlights the potential impact of IBOR transitions on the definition and the use of the Credit Rate Adjustment currently applied on the risk-free rate term structures. Furthermore, the paper proposes options and a coherent approach for dealing with the new term structures calculated with the new benchmark rates for all currencies. The proposed approaches are generic and can be applied to all currencies.

    The IBOR transition is a big challenge for both the regulators and the industry. New rates have differences between each other and the timing of the change for each jurisdiction may vary, thus posing additional challenges. Overall, the impact of the IBOR transitions in all currencies will be directly reflected on liability valuations, asset-liability management calculations and derivative valuations, and the structure of numerous (existing and new) financial and insurance products, which will refer to the new rates. Re-calibration of existing products and revaluations is expected to take place. 

    The risk-free rate methodology of EIOPA seeks to reflect the current market conditions rather than leading them to continue producing consistent risk-free rate term structures. According to the risk-free rate methodology, the approach of EIOPA is designed to secure the objectives of replicability of the methodology by undertakings, market consistency of the risk-free rate term structures produced, stability for insurance undertakings, and interests of policyholders. All four criteria, along with the criterion of the feasibility of the implementation within the risk-free rate framework have been considered thoroughly. Additional issues related to the IBOR transitions, which emerge outside the risk-free rate environment and may, directly or indirectly, affect the insurance industry and the policyholders are not covered in this paper.

     

    Related Links

    Comment Due Date: April 30, 2020

    Keywords: Europe, EU, Insurance, Benchmarks Regulation, Risk-Free Rates, ALM, IBOR Transition, Benchmark Reforms, EIOPA

    Featured Experts
    Related Articles
    News

    PRA Finalizes Supervisory Approach for Non-Systemic Banks in UK

    PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.

    April 15, 2021 WebPage Regulatory News
    News

    EBA Finalizes Standards on Methods of Prudential Consolidation

    EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).

    April 15, 2021 WebPage Regulatory News
    News

    EBA Updates List of Other Systemically Important Institutions in EU

    EBA updated the list of other systemically important institutions (O-SIIs) in EU.

    April 15, 2021 WebPage Regulatory News
    News

    BCBS Report Concludes Basel Risk Categories Can Capture Climate Risks

    BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.

    April 14, 2021 WebPage Regulatory News
    News

    UK Authorities Welcome FSB Review of their Remuneration Regime

    UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.

    April 14, 2021 WebPage Regulatory News
    News

    PRA and FCA Letter on Addressing Risks from Use of Deposit Aggregators

    PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.

    April 14, 2021 WebPage Regulatory News
    News

    MFSA to Amend Banking Act and Rules in Coming Months to Transpose CRD5

    MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.

    April 14, 2021 WebPage Regulatory News
    News

    EC Delegated Regulation on Specialized Lending Exposures Under CRR

    EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.

    April 14, 2021 WebPage Regulatory News
    News

    OSFI Proposes to Enhance Assurance Expectations for Basel Returns

    OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.

    April 13, 2021 WebPage Regulatory News
    News

    ECB Issues Results of Benchmarking Analysis of Recovery Plans of Banks

    ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.

    April 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6858