Featured Product

    BoE Publishes Notice on Collateral Referencing LIBOR for Use in SMF

    February 26, 2020

    BoE published a market notice that forms part of the Documentation for the operations of BoE under the Sterling Monetary Framework (SMF). Pursuant to this market notice, a haircut add-on will be applied to all LIBOR Linked Collateral. The haircut add-on will be 10 percentage points from October 01, 2020, 40 percentage points from June 01, 2021 and 100 percentage points from December 31, 2021. To avoid doubt, haircuts will be capped at 100%. The market notice mentions that BoE will monitor market developments in relation to fallback language and will keep under review the potential to distinguish between LIBOR Linked Collateral with and without robust fallback language, as market practice develops.

    In respect of Loan Portfolios containing both LIBOR Linked Loans and other loans, SMF participants may choose to either remove the LIBOR Linked Loans from the Loan Portfolios, or alternatively split these Loan Portfolios subject to them meeting the standard collateral eligibility requirements of BoE. The market notice makes the following changes to the eligibility of LIBOR Linked Collateral:

    • From October 01, 2020, all securities issued on or after that date and maturing after December 31, 2021, where the coupon pays a rate of interest calculated by reference to LIBOR, will be ineligible for use in the SMF
    • From October 01, 2020, all securities issued on or after that date and maturing after December 31, 2021, where embedded swap payments are calculated by reference to LIBOR, will be ineligible for use in the SMF
    • From October 01, 2020, all securities issued on or after that date and maturing after December 31, 2021, backed by loans where one or more loans in the portfolio is a LIBOR Linked Loan that was originated after October 01, 2020, will be ineligible for use in the SMF
    • From October 01, 2020, all LIBOR Linked Loans issued on or after that date will be ineligible for use in the SMF
    • From December 31, 2021, all LIBOR Linked Collateral, regardless of the issuance or origination date, will be ineligible for use in the SMF.

    Except as described above, LIBOR Linked Collateral may otherwise still be requested for eligibility until December 31, 2021. BoE intends to update, on a monthly basis, the list of eligible securities that are impacted by this policy.

     

    Related Link: Market Notice

     

    Keywords: Europe, UK, Banking, Securities, Haircut, LIBOR, Collateral, Fallback Language, Sterling Monetary Framework, BoE

    Related Articles
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.

    July 26, 2021 WebPage Regulatory News
    News

    EC to Defer Application of SFDR Standards Till July 2022

    The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.

    July 23, 2021 WebPage Regulatory News
    News

    EIOPA Consults on Reporting and Disclosures Under Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) proposed to amend the supervisory statement on supervision of run-off undertakings that are subject to Solvency II regulation.

    July 23, 2021 WebPage Regulatory News
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    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.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7295