HKMA Publishes Update on Reform of Interest Rate Benchmarks
HKMA published a circular on the latest developments related to the reform of interest rate benchmarks. The circular also sets out the steps that HKMA plans to take to monitor the progress of authorized institutions in preparing for the transition from interbank offered rates (IBORs) to alternative reference rates. HKMA observes that many authorized institutions have made progress in preparing for the transition to alternative reference rates. To monitor the development, HKMA will soon conduct a regular survey to collect information on authorized institutions’ exposures referencing IBORs and the progress of their preparatory work for the transition. HKMA will take suitable follow-up actions based on insights from the survey of individual institutions.
Authorized institutions are expected to keep abreast of both international and local developments of the benchmark reform and take them into account in their preparation for the transition. Locally, the Treasury Markets Association (TMA) has identified the Hong Kong Dollar Overnight Index Average (HONIA) as the alternative reference rate to the Hong Kong Interbank Offered Rate (HIBOR); however, there is no plan to discontinue HIBOR. The TMA has completed a public consultation on some technical refinements to HONIA and will release the results in due course. The Working Group on Alternative Reference Rates formed under the TMA has convened regular meetings to discuss issues arising from the reform, with a view to help local market participants prepare for the possible discontinuation of LIBOR and to facilitate the adoption of HONIA by market participants. The circular notes that international authorities, standard-setting bodies, and industry organizations have made significant progress in laying down critical elements for the transition. These include the:
- Ongoing developments of term rates for alternative reference rates and spread adjustments that can be applied to the alternative reference rates to address the differences between alternative reference rates and IBORs
- Standard documentation for loans and debt securities with floating rates linked to alternative reference rates
- Fallback languages that can be adopted in financial contracts referencing IBORs to cater for the scenario of IBOR discontinuation
Keywords: Asia Pacific, Hong Kong, Banking, Securities, Interest Rate Benchmarks, IBORs, LIBOR, Reference Rates, HONIA, HIBOR, HKMA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
FCA Regulatory Sandbox Open for Applications to Cohort 6Related Articles
HKMA on Fintech Adoption and Innovation by Banks in Hong Kong
HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.
BIS on Impact of Increasing Use of Cloud Technology on Cyber Risk
BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.
ECB Consults on Guide for Managing Climate and Environmental Risks
ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.
ECB Issues Opinion on Revisions to CRR in Response to COVID Crisis
ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.
EBA Assesses Interlinkages Between Recovery and Resolution Planning
EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).
SRB Publishes Final MREL Policy Under the Banking Package
SRB published the final Minimum Requirements for Own Funds and Eligible Liabilities (MREL) policy under the Banking Package.
EIOPA Risk Assessment Shows Increase in Credit and Market Risks
EIOPA published its risk dashboard based on Solvency II data from the fourth quarter of 2019.
MNB Issues Statement on Loan Payments After Moratorium Expires
MNB published a statement on loan payments post the announced moratorium, in addition to a set of new questions and answers (Q&A) on supervisory measures and requirements announced amid COVID-19 pandemic.
EBA Single Rulebook Q&A: Second Update for May 2020
EBA updated the Single Rulebook question and answer (Q&A) tool for banks.
US Agencies Temporarily Amend Supplementary Leverage Ratio Calculation
US Agencies (FDIC, FED, and OCC) published an interim final rule that temporarily revises the supplementary leverage ratio calculation for depository institutions.
