BoE Publishes Notice on Collateral Referencing LIBOR for Use in SMF
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
Previous Article
CFTC Proposes Rules on Derivative Position Limits and Swap ExecutionRelated Articles
US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint
The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
EBA Issues Guide on Bank Resolvability, Consults on Transferability
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets
The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.
FCA Registers Securitization Repositories; PRA Issues 2022 Priorities
The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.
EC Regulation Sets Out Methods for Measuring K-Factors Under IFR
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
BIS Studies How Platform Models Impact Financial Stability & Inclusion
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
ESAs Publish List of Financial Conglomerates for 2021
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
APRA Licenses Two More Banks, Reduces Committed Liquidity Facility
The Australian Prudential Regulation Authority (APRA) updated the list of authorized deposit-taking institutions, granting license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.
EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions
EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).
EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges
The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.
