Featured Product

    IOSCO Publishes Statement on Transition of Benchmark Rates

    July 31, 2019

    IOSCO published a statement to inform relevant stakeholders about how an early transition to risk-free rates can mitigate potential risks arising from the expected cessation of the London Inter-Bank Offered Rate (LIBOR). The statement is important for all market participants with a significant exposure to the USD LIBOR benchmark through, for example, the trading of financial instruments and other arrangements that reference this benchmark directly. It is also relevant for participants that reference another rate which, in turn, uses USD LIBOR as an input for its calculation.

    Through its statement, IOSCO wishes to raise awareness about the impact of the likely cessation of LIBOR and about the need for relevant stakeholders to transition from the widely used USD LIBOR to the alternative risk-free rates—particularly to the new Secured Overnight Financing Rate (SOFR). Raising awareness is important to facilitate prudent risk management across corporate and financial institutions and to mitigate potential financial stability and conduct risks. The statement sets out a number of matters for users of the USD LIBOR benchmark to consider. These matters include risk-free rates, infrastructure, conventions, fallbacks, term rates, regulatory dependencies, and communication and international engagement. For each of these, the statement recognizes that the use of USD LIBOR varies by jurisdiction. Therefore, the statement aims to increase awareness about the need to move away from LIBOR and to allow for more detailed discussions on the transition to alternative risk-free rates, where appropriate.

    Keeping in mind the information set out in this statement, market participants should consider how this transition will affect their business and what steps are needed to mitigate the related risks. The following are the key messages of the statement:

    • Risk-free rates provide a robust alternative to the interbank offered rates (IBORs) and can be used in the majority of products.
    • In both new and existing IBOR contracts, the inclusion of robust fallbacks should be considered a priority.
    • The best risk mitigation to a LIBOR cessation event is moving to risk-free rates now.
    • It is prudent risk management for market participants to engage early in the LIBOR transition process in preparation for the cessation of LIBOR post-2021.

     

    Related Links

    Keywords: International, Banking, Securities, Risk-free Rates, IBOR, LIBOR, SOFR, Interest Rate Benchmarks, Benchmarks Fallbacks, IOSCO

    Related Articles
    News

    FSI Paper Examines Use of Suptech Initiatives by Financial Authorities

    The Financial Stability Institute (FSI) of BIS published a paper that examines the suptech developments by analyzing suptech initiatives of 39 financial authorities globally.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Consult on Policy Statement on Allowance for Credit Losses

    US Agencies (FDIC, FED, NCUA, and OCC) are consulting on the policy statement on allowances for credit losses and on the guidance on credit risk review systems.

    October 17, 2019 WebPage Regulatory News
    News

    PRA Consults on Approach to Supervising Liquidity and Funding Risks

    In consultation paper (CP27/19), PRA published a proposal (CP27/19) to update the supervisory statement SS24/15 on the PRA approach to supervising liquidity and funding risk.

    October 17, 2019 WebPage Regulatory News
    News

    FSB Report Examines Implementation and Impact of G20 Financial Reforms

    FSB published fifth annual report on the implementation and effects of the G20 financial regulatory reforms.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Launches Consultation on Comprehensive Pillar 3 Disclosures

    EBA proposed the new comprehensive implementing technical standard (ITS) for public disclosures by financial institutions.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Consults on Revised Technical Standards on Supervisory Reporting

    EBA launched a consultation on the revised implementing technical standards, or ITS, on supervisory reporting.

    October 16, 2019 WebPage Regulatory News
    News

    BoE and FCA Examine Use of Machine Learning in Financial Sector in UK

    BoE and FCA published a report on the results of a joint survey by BoE and FCA in 2019 to better understand the use of machine learning in the financial services sector in UK.

    October 16, 2019 WebPage Regulatory News
    News

    BCBS Report Examines Progress on Adoption of Basel Framework

    BCBS published the seventeenth progress report on adoption of Basel regulatory framework.

    October 16, 2019 WebPage Regulatory News
    News

    APRA Proposes Measures to Strengthen Capital for Bank Depositors

    APRA proposed changes to APS 111, which is the prudential standard on measuring capital adequacy and establishes the criteria for regulatory capital requirements of authorized deposit-taking institutions.

    October 15, 2019 WebPage Regulatory News
    News

    EIOPA Consults on Technical Advice for the 2020 Review of Solvency II

    EIOPA is consulting on an opinion that sets out technical advice for the 2020 review of Solvency II.

    October 15, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3981