Featured Product

    FINMA Issues Guidance on LIBOR Replacement

    July 05, 2021

    The Swiss Financial Market Supervisory Authority FINMA published guidance (02/2021) on the derivative trading obligations and the London Inter-bank Offered Rate (LIBOR) replacement. Earlier, in the March 2020 Guidance (01/2020), FINMA had made clear that amendments to the existing derivative contracts solely to address the reference rate reforms would not trigger margin obligations. In this subsequent guidance, FINMA sets out additional clarifications in the course of the changeover to the new reference interest rates at the end of 2021. FINMA states that adjustments to existing derivative contracts solely to address the reference rate reforms are not considered as newly concluded derivative contracts and, therefore, do not trigger either clearing or margin obligations.

    However, the following will be considered as adjustments:

    • Replacement, extension, or other modification to an existing derivative contract that replaces the operative benchmark rate; replacements can also be made as part of portfolio compression
    • Introduction of a fallback clause in relation to the operative benchmark rate for a derivative contract
    • Technical adaptations required to implement the aforementioned adjustments

    The adjustments may, in particular, modify the maturity or effect a change in the actual notional amount of the existing derivative contract, but they must be necessary for the replacement of the reference rate and abide by the market practices applicable in each case for the new reference rates. This guidance relates solely to the regulatory derivative obligations under the Financial Market Infrastructure Act or FMIA. In providing these clarifications, FINMA is also responding to international developments and contributing to the timely replacement of LIBOR. FINMA appeals to market participants to continue to give top priority to preparations for LIBOR replacement.

     

    Related Links

    Keywords: Europe, Switzerland, Banking, LIBOR, Benchmark Reforms, Financial Market Infrastructures Act, Derivatives, Risk-Free Rates, Fallback Clause, FINMA

    Related Articles
    News

    OSFI Issues Results of Pilot on Climate Risk Scenario Analysis

    The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.

    January 20, 2022 WebPage Regulatory News
    News

    EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR

    The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).

    January 20, 2022 WebPage Regulatory News
    News

    ECB Issues Opinions on Green Bonds Standard and CRR Proposals

    The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.

    January 19, 2022 WebPage Regulatory News
    News

    ESRB Explores Policy Response to Risks Arising from Digitalization

    The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.

    January 18, 2022 WebPage Regulatory News
    News

    HKMA Consults on FIRO Code, Revises Policy on Foreign Exchange Risk

    The Hong Kong Monetary Authority (HKMA) is consulting on the draft Financial Institutions (Resolution) Ordinance (Cap. 628), or FIRO, Code of Practice chapter on liquidity and funding in resolution, until March 14, 2022.

    January 18, 2022 WebPage Regulatory News
    News

    FI Publishes Multiple Regulatory and Reporting Updates

    The Swedish Financial Supervisory Authority (FI) announced that the capital adequacy reporting as at December 31, 2021 must be done by February 11, 2022.

    January 17, 2022 WebPage Regulatory News
    News

    EU Authorities Address COVID-19 Reporting, MCD, and PSD2 Issues

    The European Banking Authority (EBA) announced that the guidelines on the reporting and disclosure of exposures subject to measures COVID-relief measures shall continue to apply until further notice.

    January 17, 2022 WebPage Regulatory News
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    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.

    January 13, 2022 WebPage Regulatory News
    News

    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).

    January 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7903