Featured Product

    ISDA Consults on Final Parameters for Benchmark Fallback Adjustments

    September 18, 2019

    ISDA launched a consultation on the final parameters for the adjustments that will apply to alternative risk-free rates if derivatives fallbacks are triggered. The deadline for responses to the consultation is October 23, 2019. This latest publication follows two earlier consultations, which set out options for the adjustments that will apply to the relevant risk-free rates if fallbacks are triggered for derivatives referencing nine interbank offered rates (IBORs). ISDA has also published a report by The Brattle Group that summarizes the final results of the second of those consultations, which focused on US dollar LIBOR, CDOR from Canada, and HIBOR from Hong Kong.

    This consultation is intended to finalize the methodologies for the adjustments that will be made to derivatives fallbacks in the event certain interbank offered rates (IBORs) are permanently discontinued. These adjustments are necessary because of the differences between the IBORs and the risk-free rates. The adjustments reflect that the IBORs are currently available in multiple tenors, but the risk-free rates identified as fallbacks are overnight rates. The IBORs also incorporate a bank credit risk premium and a variety of other factors, while risk-free rates do not. The Brattle Group report confirms preliminary findings that the overwhelming majority of respondents preferred the "compounded setting in arrears rate" to address the difference in tenors and the "historical mean/median approach" to address the difference in risk premia. 

    Based on the results of this consultation, ISDA will make the relevant adjustments to the 2006 ISDA Definitions to incorporate fallbacks for new IBOR trades. A protocol will also be published to enable market participants to include fallbacks within legacy IBOR contracts if they choose to. Both the amended Definitions and the protocol are expected to be finalized by the end of this year, with implementation in 2020.

     

    Related Links

    Comment Due Date: October 23, 2019

    Keywords: International, Banking, Securities, IBORs, LIBOR, HIBOR, Benchmark Fallbacks, Interest Rate Benchmarks, Risk-Free Rates, ISDA Protocol, ISDA Definitions, ISDA

    Related Articles
    News

    EIOPA Report Analyzes Use and Impact of Long-Term Guarantee Measures

    EIOPA submitted—to the European Parliament, the Council of the European Union, and EC—its 2020, fifth, and last annual report on long-term guarantee measures and measures on equity risk.

    December 03, 2020 WebPage Regulatory News
    News

    BIS, SNB, and SIX Announce Successful Completion of CBDC POC

    The BIS Innovation Hub Swiss Centre, SNB, and the financial infrastructure operator SIX announced the successful completion of a joint proof-of-concept (PoC) experiment as part of the Project Helvetia.

    December 03, 2020 WebPage Regulatory News
    News

    EBA Sets Out Treatment of Certain Banking Book Positions Under FRTB

    EBA published the final draft regulatory technical standards for calculation of own funds requirements for market risk, under the standardized and internal model approaches of the Fundamental Review of the Trading Book (FRTB) framework.

    December 03, 2020 WebPage Regulatory News
    News

    EIOPA Consults on Integrating Climate Change into SII Standard Formula

    EIOPA published discussion paper on a methodology for the potential inclusion of climate change in the Solvency II (sometimes also written as SII) standard formula when calculating natural catastrophe underwriting risk.

    December 02, 2020 WebPage Regulatory News
    News

    EU Issues Corrigenda to Investment Firms Directive and Regulation

    EU published, in the Official Journal of the European Union, corrigenda to the Directive and the Regulation on the prudential requirements and supervision of investment firms.

    December 02, 2020 WebPage Regulatory News
    News

    MAS Proposes Changes to Rules Arising from Banking Amendment Act

    MAS proposed amendments to certain regulations, notices, and guidelines arising from the Banking (Amendment) Act 2020.

    December 02, 2020 WebPage Regulatory News
    News

    PRA to Elaborate on Approach to Transposition of CRD5 by Mid-December

    PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.

    November 30, 2020 WebPage Regulatory News
    News

    RBNZ Consults on Aspects of Insurance Act, Solvency Standards & IFRS17

    RBNZ launched consultations on the scope of the Insurance Prudential Supervision Act (IPSA) 2010 and on the associated Insurance Solvency Standards.

    November 30, 2020 WebPage Regulatory News
    News

    SRB Sets Out Work Program for 2021-2023

    SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.

    November 30, 2020 WebPage Regulatory News
    News

    EIOPA Consults on KPIs on Sustainability for Non-Financial Reporting

    EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.

    November 30, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6191