FINMA Issues Notification on LIBOR Replacement in Derivatives Sector
FINMA published notification 08/2020 on LIBOR replacement in the derivatives sector. FINMA recommends that the supervised parties affected by the LIBOR replacement sign the new fallback protocol of the ISDA and the expected equivalent changes to the Swiss framework agreements for OTC derivatives as early as possible.
The cessation of LIBOR is getting closer. In terms of volume, the largest proportion of the contracts still linked to LIBOR are over-the-counter derivatives (OTC derivatives). In a survey of Swiss institutions in June 2020, FINMA found that OTC derivatives with a volume of over CHF 11.5 trillion are contractually bound to LIBOR beyond 2021. FINMA sees application of the new fallback documents to OTC derivatives, by as many contracting parties as possible, as essential so that the high risks associated with the cessation of LIBOR can be minimized. ISDA had announced the expected publication of its IBOR fallback documents for such OTC derivatives by October 23, 2020. After the ISDA fallback documents come into force in January 2021, no new LIBOR OTC derivative contracts should be entered into without robust fallback clauses.
Related Links
- FINMA Press Release (in German)
- ISDA Press Release
Keywords: Europe, Switzerland, Banking, Insurance, Securities, Benchmark Fallbacks, LIBOR, Derivatives, Benchmark Reforms, Fallback Protocol, ISDA, FINMA
Previous Article
OSFI to Focus on Prudential Implications of AML/ATF ComplianceRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
HKMA Announces Launch of Data Repository on Sustainable Finance
The Hong Kong Monetary Authority (HKMA) announced that the Green and Sustainable Finance (GSF) Cross-Agency Steering Group has launched the information and data repositories and outlined the progress made in advancing the development of green and sustainable finance in Hong Kong.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
NGFS Report on Integration of G-Cubed Model into NGFS Scenarios
The Network for Greening the Financial System (NGFS) published a report that explores the feasibility of integrating the G-Cubed general equilibrium model into the NGFS suite of models.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
