ISDA Launches IBOR Fallbacks Supplement and Protocol
ISDA launched the IBOR Fallbacks Supplement and the IBOR Fallbacks Protocol, with both becoming effective on January 25, 2021. The Supplement and Protocol are intended to help reduce the systemic impact of a key interbank offered rate (IBOR) becoming unavailable while market participants continue to have exposure to that rate. BoE announced that it has signed up to the ISDA IBOR Fallbacks Protocol in respect of its own activities as a market participant.
The IBOR Fallbacks Supplement will amend the ISDA standard definitions for interest rate derivatives to incorporate robust fallbacks for derivatives linked to certain IBORs, with the changes coming into effect on January 25, 2021. From that date, all new cleared and non-cleared derivatives that reference the definitions will include the fallbacks. The IBOR Fallbacks Protocol will enable market participants to incorporate the revisions into their legacy non-cleared derivatives trades with other counterparties that choose to adhere to the Protocol. The fallbacks for a particular currency will apply following a permanent cessation of the IBOR in that currency. For derivatives that reference LIBOR, the fallbacks in the relevant currency would also apply following a determination by the UK FCA that LIBOR in that currency is no longer representative of its underlying market. In each case, the fallbacks will be adjusted versions of the risk-free rates identified in each currency.
At launch, 257 derivatives market participants had adhered to the Protocol during the two-week pre-launch "escrow period." The ISDA Protocol provides an efficient mechanism for market participants to amend the existing derivative contracts based on LIBOR and a range of other benchmarks to include fallback language. The new fallback language has been developed by ISDA at the request of FSB, working with a wide range of market participants and international authorities. FSB has strongly encouraged the widespread adoption of this Protocol.
Related Links
Keywords: International, Europe, UK, Banking, Securities, Interest Rate Benchmark, IBOR, Derivatives, LIBOR, Fallback Protocol, Benchmark Reforms, BoE
Previous Article
EBA Publishes Single Rulebook Q&A Updates in October 2020Related Articles
APRA Finalizes Reporting Standard for Operational Risk Requirements
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
EBA Publishes Single Rulebook Q&A Updates in February 2021
The EBA Single Rulebook question and answer (Q&A) tool updates for this month include answers to ten questions.
ESMA Releases Schema and Instructions for Securitization Reporting
ESMA updated the set of questions and answers (Q&A), along with the reporting instructions and an XML schema for the templates set out in the technical standards on disclosure requirements, under the Securitization Regulation.
EU Rule Amends Requirement for European Single Electronic Format
EU published Regulation 2021/337, which amends the Transparency Directive (2004/109/EC), regarding the use of the single electronic reporting format for annual financial reports.
EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
FSB Sets Out Work Priorities for 2021
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
