Featured Product

    BCBS and FSB Set Out Recommendations for Benchmark Transition

    July 09, 2020

    BCBS and FSB published a report on supervisory issues associated with benchmark transition. The report includes insights on the remaining challenges to transition based on surveys undertaken by FSB, BCBS, and IAIS. In light of the survey results, the report sets out recommendations for authorities to support the progress of financial institutions and their clients in transitioning away from LIBOR. The report highlights that continued reliance of financial markets on LIBOR poses risks to global financial stability. Transition away from LIBOR by the end of 2021 requires significant commitment and sustained effort from both financial and non-financial institutions across many jurisdictions. The report responds to the G20 request to identify challenges to benchmark transition and to explore ways to address them. The report will be delivered to G20 Finance Ministers and Central Bank Governors ahead of their virtual meeting on July 18, 2020.

    The survey results highlight that, compared to FSB jurisdictions, non-FSB jurisdictions are less likely to foresee significant risks in LIBOR transition, mainly due to perceptions of less frequent use of LIBOR in their financial systems. Most FSB jurisdictions have a strategy to address LIBOR transition, as opposed to only half of the surveyed non-FSB jurisdictions. Authorities in LIBOR jurisdictions are relatively more advanced in taking initiatives to facilitate and monitor benchmark transition. Financial institutions in these jurisdictions have shown better progress, although significant challenges remain. In light of the expected cessation of LIBOR after the end of 2021, authorities should strengthen their efforts in facilitating financial and non-financial institutions to transition away from LIBOR. The report includes three sets of recommendations to support LIBOR transition that should generally be applicable to all jurisdictions with LIBOR exposures:

    • Identification of transition risks and challenges—Authorities and standard-setting bodies are recommended to issue public statements to promote awareness of LIBOR cessation and associated risks, both within financial institutions and across the financial system. Authorities should evaluate the need and then undertake regular surveys to monitor financial institutions’ exposure to LIBOR and identify possible areas of risk concentration. Supervisory authorities should take follow up actions in light of survey results. Authorities are also recommended to request regular updates from regulated financial institutions on key risks and action plans as well as on steps already taken, including identification of senior management responsible for transition.
    • Facilitation of LIBOR transition—Authorities should establish a formal transition strategy supported by adequate resources and industry dialog. Supervisory authorities should consider increasing the intensity of supervisory actions when the preparatory work of individual banks is unsatisfactory.
    • Coordination—Authorities are recommended to promote industry-wide coordination, maintain dialog on the adoption of fallback language, consider identifying legislative solutions where necessary, and exchange information on best practices and challenges. 

    As part of the next steps, FSB, in collaboration with other international bodies and standard-setting bodies, will design a simple set of key metrics or indicators to update the global LIBOR exposures and transition status and will identify a list of qualitative questions to monitor the progress in implementing the above recommendations. The aim is to provide another assessment of the transition progress by early next year. FSB will continue to monitor the evolving impact of the COVID-19 pandemic on the ongoing benchmark transition. FSB will incorporate the findings from its monitoring exercise into the annual progress report of FSB on the implementation of recommendations to reform major interest rate benchmarks (a report that is to be published before the G20 Summit in November).

     

    Related Links

    Keywords: International, Banking, Securities, Interest Rate Benchmark, LIBOR, Risk-Free Rates, IBOR Transition, OTC Derivatives, Basel, BCBS, FSB

    Featured Experts
    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    News

    HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26

    HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6821