ISDA published a statement summarizing responses to the supplemental consultation on the spread and term adjustments that would apply to fallbacks for derivatives referencing euro LIBOR and EURIBOR. After considering the responses received from 57 entities, ISDA expects to proceed with developing fallbacks for inclusion in its standard definitions based on the compounded setting in arrears rate with a backward shift and the five-year historical median approach to the spread adjustment for EUR LIBOR and EURIBOR.
Majority of the respondents agreed with an implementation based on the "compounded setting in arrears rate approach with a backward-shift adjustment" and a spread adjustment based on a "historical median over a five-year lookback period," for fallbacks in derivatives referencing EUR LIBOR and EURIBOR and other less widely used interbank offered rates (IBORs). Respondents cited both support for the substance of these approaches and a strong desire to apply a consistent approach across all benchmarks covered by this supplemental consultation and the prior consultations.In the coming weeks, ISDA expects to publish additional information, including anonymized and aggregated responses to the supplemental consultation.
The supplemental consultation, which was launched in December 2019, covered technical issues related to the adjustment methodology and sought feedback on whether the adjustments would be appropriate for lesser-used IBORs if ISDA implements fallbacks for those benchmarks in the future. This supplemental consultation followed three earlier consultations—two setting out options for the adjustments that will apply to the relevant risk-free rates if fallbacks are triggered for derivatives referencing nine IBORs and one on the final parameters for the adjustment methodology.
Keywords: International, Banking, Securities, IBORs, LIBOR, Risk-free Rates, Interest Rate Benchmarks, EURIBOR, Fallback Provisions, Derivatives, Responses to Consultation, ISDA
Previous ArticleBCBS Updates Basel III Monitoring Workbook in February 2020
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.