Featured Product

    ISDA Issues Response to IASB Draft on Interest Rate Benchmark Reform

    June 19, 2019

    ISDA issued a response to the IASB exposure draft on interest rate benchmark reform (ED/2019/1). The letter welcomes the steps taken by IASB to amend old and new standards on financial instruments, namely IAS 39 and IFRS 9. IASB had, in May 2019, proposed the Phase I amendments in response to the challenges posed by the interbank offered rates (IBOR) reform in relation to the uncertainty caused by the hedge accounting forward-looking rules of IFRS. The response of ISDA points out that IASB should accelerate the work to address the next phase of issues arising from IBOR reform.

    The detailed responses are included as an appendix to the response letter. The response letter highlights that, while it will be necessary to provide some disclosure of how entities apply the relief, ISDA suggests any incremental disclosure over the one already required by IFRS 7 (Financial instruments: Disclosures) should be kept to a minimum. Quantitative disclosure should relate only to the nominal value of hedging instruments and hedged items to which the relief is applied.

    ISDA requests IASB to consider Phase II in parallel with completing the Phase I amendments. The Phase II issues that are especially urgent are as follows:

    • Clarification that entities can future-proof their hedge designations to reference a transition from an IBOR to a risk-free rate (RFR), so as to allow continuity of the hedge relationship.
    • On transition from IBOR to a RFR, guidance that the consequential change to the hedge designation will not trigger the discontinuance of the hedging relationship.
    • Relief from the retrospective hedge effectiveness test under IAS 39 for hedging relationships affected by IBOR reform. A condition for applying the relief would be that the underlying economic relationship between the hedged item and the hedging instrument is expected to continue until the transition is complete, similar to the requirements of IFRS 9. The relief would be helpful for the entities that are unable to change their hedge accounting approach to IFRS 9 due to the need to continue operating a macro cash flow or portfolio fair value hedge accounting model, which IFRS 9 cannot presently accommodate.

     

    Related Links

    Keywords: International, Accounting, Banking, IFRS 9, IAS 39, Financial Instruments, Hedge Accounting, IBOR, Phase I, Phase II, Interest Rate Benchmarks, IASB, ISDA

    Featured Experts
    Related Articles
    News

    APRA Consults on Reporting Standard for Credit Risk Management

    APRA is consulting on the reporting standard for credit risk management (ARS 220.0).

    October 28, 2020 WebPage Regulatory News
    News

    Regulators Fine Goldman Sachs for Risk Management Failures

    FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).

    October 23, 2020 WebPage Regulatory News
    News

    ISDA Launches IBOR Fallbacks Supplement and Protocol

    ISDA launched the IBOR Fallbacks Supplement and the IBOR Fallbacks Protocol, with both becoming effective on January 25, 2021.

    October 23, 2020 WebPage Regulatory News
    News

    Canada Hosts International Conference of Banking Supervisors

    BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.

    October 22, 2020 WebPage Regulatory News
    News

    FCA Proposes More Measures to Help Insurance Customers Amid Crisis

    FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.

    October 21, 2020 WebPage Regulatory News
    News

    EBA Issues Opinion to Address Risk Stemming from Legacy Instruments

    EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.

    October 21, 2020 WebPage Regulatory News
    News

    ESRB Publishes Non-Bank Financial Intermediation Risk Monitor for 2020

    ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).

    October 21, 2020 WebPage Regulatory News
    News

    HM Treasury Publishes Policy Statement Amending Benchmarks Regulation

    HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.

    October 21, 2020 WebPage Regulatory News
    News

    APRA Initiates Action Against a Bank for Liquidity Compliance Breach

    APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.

    October 21, 2020 WebPage Regulatory News
    News

    European Council Adopts Position on Capital Markets Recovery Package

    Ambassadors of EU member states agreed on the mandate of European Council on the Capital Markets Recovery Package, to support economic recovery from the COVID-19 crisis.

    October 21, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6011