BoE-FCA and OCC Issue Statements on LIBOR Transition
In a recent statement, BoE and FCA supported and encouraged liquidity providers in the USD linear interest rate swaps market to adopt new trading conventions for interdealer trading based on Secured Overnight Financing Rate (SOFR), instead of on London Interbank Offered Rate (LIBOR), from July 26, 2021. This is to facilitate a shift in the market liquidity toward SOFR, bringing benefits for a wide range of users as they move away from LIBOR.
The proposed change will involve interdealer brokers moving the primary basis of their pricing screens and curve construction for interest rate swaps from USD LIBOR to SOFR. At present, SOFR swaps are priced by default in reference to a LIBOR swap adjusted by the LIBOR-SOFR basis. As a result of this change, SOFR swaps would be the primary pricing point. LIBOR swaps would, therefore, be priced by reference to SOFR swaps adjusted by the LIBOR-SOFR basis. The same change would be made in the trading of swap spreads (swaps against bonds) in USD markets, such that the default pricing will show SOFR swaps relative to US Treasuries. For the avoidance of doubt, from July 26, 2021, FCA and BoE encourage all trading in USD LIBOR swaps, and USD LIBOR-based swap spreads in the interdealer broker market to be replaced with trading in SOFR swaps and SOFR-based swap spreads. USD LIBOR is expected to be accessible only as a basis swap to SOFR in the interdealer broker market from this date. However screens for outright LIBOR swaps and LIBOR-based swap spreads are expected to remain available for informational purposes, but not trading activity, until October 22, 2021.
Additionally, as per a recent statement form the US regulatory agency OCC, every bank, regardless of size, is expected to demonstrate that its replacement rate selections are appropriate for the bank’s products, funding needs, and operational capacities. The statement noted the importance of banks considering the strength of the fallback provisions they employ and noted that it is imperative that banks continue careful planning for the LIBOR transition. OCC examiners will continue to work with banks to ensure their full preparedness.
Related Links
Keywords: Europe, Americas, UK, US, Banking, Securities, LIBOR, SOFR, Benchmark Reforms, Interest Rate Benchmarks, LIBOR Transition, OCC, FCA, BoE
Previous Article
BIS and Nordic Central Banks Launch Innovation Hub in StockholmRelated Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
