FSB Issues Progress Report on Reforming Major Interest Rate Benchmarks
FSB published a progress report on the implementation of its recommendations to reform major interest rate benchmarks. The report sets out the progress made on the development of overnight nearly risk-free rates (RFRs) and markets based on these rates; it also assesses progress on further reforms to interbank offered rates (IBORs). FSB will publish the next progress report in late 2019.
The progress report considers three key areas:
-
IBORs. Although the London Interbank Offered Rate (LIBOR) has been strengthened, authorities have warned that publication of LIBOR may cease once official sector support for the benchmark is withdrawn at the end of 2021. Work has continued among the other major IBORs (EURIBOR and TIBOR) to strengthen the existing methodologies to make them more grounded in actual transactions as well as to strengthen regulatory frameworks and supervision.
-
Alternative reference rates. In the markets facing the disappearance of IBORs, notably markets currently reliant on LIBOR, there needs to be an orderly transition to new reference rates that are sufficiently robust for such extensive use. Since the 2017 progress report, a great deal of progress has been made to identify RFRs and other alternative reference rates in the currency areas that are currently reliant on LIBOR benchmarks. Progress has also been made to plan for, and in some markets, begin to execute the transition to those RFRs.
-
Enhancing contractual robustness. Significant work continues on the part of FSB member authorities, national working groups, ISDA, and other trade associations on the important task of strengthening contractual robustness to the risk of discontinuation of major interest-rate benchmarks. This issue goes beyond derivatives markets and applies to many types of cash products, including syndicated loans, bonds, and mortgages.
FSB started its work on the reforms to IBORs, in response to the cases of attempted manipulation and to the decline in liquidity in key interbank unsecured funding markets. In 2014, FSB set out recommendations to reform major interest rate benchmarks, such as key IBORs, and has been monitoring progress on the implementation since then.
Related Links
Keywords: International, Banking, RFR, LIBOR, Reference Rates, Interest Rate Benchmarks, IBOR, FSB
Related Articles
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
EBA Updates Lists of Entities for Use in Capital Calculations under SA
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS Amends Notice on Related Party Transactions of Banks
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA Consults on Standards Related to FRTB-SA
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA Proposes Rules Related to IRB Approach for Credit Risk
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
