Featured Product

    ECB Publishes Report on Fallback Arrangements for Users of €STR

    November 12, 2019

    ECB published a report, from the private-sector working group on euro risk-free rates, that recommends possible fallback arrangements for users of €STR products. The working group has assessed different fallback arrangements for products referencing €STR, the new overnight euro risk-free rate. Based on the assessment, the working group recommends market participants to consider existing methodological review procedures of €STR and the policies and procedures in case of the possible cessation of the €STR, along with fallback provisions provided in the EONIA to €STR Legal Action Plan, as sufficient contingency to serve as fallback measures for €STR. The working group is of the opinion that this combination will provide sufficient contingency as fallback measures for the €STR.

    The report points out that the private-sector working group on euro risk-free rates considered the following two options for fallback arrangement for €STR:

    • Select one of the alternative rates that were considered in the consultation before the euro risk-free rate was selected.
    • Take into account the methodology review that ECB will conduct on a regular basis to ensure that the underlying interest of the €STR is adequately measured and captured. Also take into account the policies and procedures to be followed in case of the possible cessation of the €STR, in line with the ECB legal framework, combined with the use of contractual fallbacks for products that reference the €STR that are consistent with the relevant parts of those already recommended with respect to EONIA.

    The report is intended to provide the supervised entities with guidance on potential ways to comply with Article 28.2 of the EU Benchmarks Regulation when using the euro short-term rate (€STR) as the euro risk-free rate in contracts. Article 28.2 of the Benchmarks Regulation requires supervised entities to have robust written plans setting out the actions they would take in the event that a benchmark materially changes or ceases to be provided. Those plans should be reflected in the contractual relationship with clients. Where feasible and appropriate, the plans should include the nomination of one or several alternative benchmarks that could be referenced to substitute the benchmarks no longer provided, indicating why such benchmarks would be suitable alternatives. 

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, €STR, Risk-free Rates, Benchmarks Regulation, Fallback Provisions, Interest Rate Benchmarks, ECB

    Related Articles
    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

    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

    PRA Consults on Implementation of Certain Provisions of CRD5 and CRR2

    PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule to Reduce Impact of Large Bank Failures

    US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).

    October 20, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Rule on Net Stable Funding Ratio Requirements

    US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.

    October 20, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6004