Featured Product

    FSB Letter to ISDA on Ensuring Robustness of Derivatives Contracts

    March 15, 2019

    Co-chairs of the Official Sector Steering Group (OSSG) of FSB issued a letter encouraging ISDA to continue its work on the contractual robustness of derivatives to risks of interest rate benchmark discontinuation. The letter highlights that the measures that ISDA is taking will play an important role in the transition from LIBOR and will serve to strengthen contract language in derivatives referencing other Interbank Offered Rates (IBORs). The adoption of appropriately revised fallbacks by market participants will help to mitigate a key source of risk to the financial system.

    The letter raises three important issues that the OSSG believes ISDA is moving to address:

    • The addition of other trigger events. The letter encourages ISDA to ask for market opinion on the events that would trigger a move to the spread-adjusted fallback rate for derivatives referencing IBORs. Triggers that would only take effect on the date on which LIBOR permanently or indefinitely stopped publication could leave those with LIBOR-referencing contracts still exposed to a number of risks.
    • The timing for an ISDA consultation on USD LIBOR and certain other key IBORs. The OSSG also understands that ISDA intends to consult on USD LIBOR, CDOR, HIBOR, and SOR in early 2019 and the OSSG strongly supports this. The OSSG co-chairs also encourage ISDA to consult on the key technical details that the ISDA Board Benchmark Committee will need to decide on, before implementation can begin.
    • The necessity of governance and transparency as ISDA makes its final decisions. Importance of this work is such that a careful process of assessment and consideration is essential before the publication of outcomes. It is important to ensure transparency about how the ISDA Board and/or Benchmark Committee would arrive at its decision.

    FSB and member authorities, through the OSSG, are working to implement and monitor recommendations of the 2014 FSB report on reforming major interest rate benchmarks. Since July 2016, ISDA has undertaken work, at the request of the OSSG, to strengthen the robustness of derivatives markets in context of the discontinuation of widely used interest rate benchmarks. The OSSG engages regularly with ISDA and other stakeholders with the goal of enhancing contractual robustness in derivatives products and cash products such as loans, mortgages, and floating rate notes.

     

    Related Links

    Keywords: International, Banking, Securities, Derivative Contracts, LIBOR, IBOR, Interest Rate Benchmarks, Interest Rate Risk, OTC Derivatives, ISDA, FSB

    Related Articles
    News

    HKMA Announces Liquidity Measures in Response to COVID-19 Outbreak

    HKMA issued a circular on liquidity measures that HKMA has taken or plans to take in response to COVID-19 outbreak.

    April 03, 2020 WebPage Regulatory News
    News

    BaFin Lowers Countercyclical Capital Buffer Amid COVID-19 Outbreak

    BaFin published a general order to lower the countercyclical capital buffer (CCyB) from 0.25% to 0% as of April 01, 2020.

    April 03, 2020 WebPage Regulatory News
    News

    ESMA Updates Risk Assessment in Light of COVID-19

    ESMA updated its risk assessment to account for the impact of the COVID-19 pandemic.

    April 02, 2020 WebPage Regulatory News
    News

    FSB Outlines and Reprioritizes Its Work to Address COVID-19 Risks

    FSB published a statement that outlines its work toward addressing the financial stability risks posed by COVID-19, along with the reprioritization of its work program for 2020.

    April 02, 2020 WebPage Regulatory News
    News

    EIOPA Announces Measures to Address the Impact of COVID-19

    Due to the outbreak of COVID-19, EIOPA is re-prioritizing and alleviating the burden by extending the deadlines or delaying projects where input from national competent authorities and/or industry is foreseen.

    April 02, 2020 WebPage Regulatory News
    News

    EBA Guidelines on Use of Payment Moratoria to Address Liquidity Issues

    EBA published detailed guidance on the treatment of legislative and non-legislative moratoria on loan repayments to be applied before June 30, 2020, in light of the COVID-19 crisis.

    April 02, 2020 WebPage Regulatory News
    News

    PRA Outlines Approach to Reporting and Disclosures Amid COVID-19

    PRA published a statement to outline its approach to regulatory reporting and Pillar 3 disclosures for UK banks, building societies, designated investment firms, and credit unions.

    April 02, 2020 WebPage Regulatory News
    News

    PRA Finalizes Certain Modeling Issues for Solvency II Internal Models

    PRA published a statement (PS9/20) that sets out the final policy on modeling of income-producing real estate loans and internal credit assessment for illiquid, unrated assets within the Solvency II internal models.

    April 02, 2020 WebPage Regulatory News
    News

    EIOPA Issues Statement on Mitigating Impact of COVID-19 Outbreak

    EIOPA issued a statement to insurers and intermediaries, urging them to take steps to mitigate the impact of COVID-19 on consumers.

    April 01, 2020 WebPage Regulatory News
    News

    APRA on Changes to Reporting Obligations for Banks Due to COVID-19

    APRA, in collaboration with the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS), published a letter outlining temporary changes in reporting obligations for authorized deposit-taking institutions and registered financial corporations, in response to COVID-19.

    April 01, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4936