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

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    EC to Defer Application of SFDR Standards Till July 2022

    The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.

    July 23, 2021 WebPage Regulatory News
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Examines Asset Encumbrance in Banking Sector

    The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.

    July 21, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7291