Featured Product

    BoE and FCA Encourage Switch to SONIA in Interest Rate Swap Markets

    September 28, 2020

    BoE and FCA are supporting and encouraging liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on SONIA, instead of LIBOR, from October 27, 2020. The intention is to facilitate the further shift in market liquidity toward SONIA swaps, bringing benefits for a wide range of end-users and other market participants as they move away from the use of LIBOR.

    A key milestone recommended by the Working Group on Sterling Risk-Free Reference Rates is to cease initiation of new GBP LIBOR-linked linear derivatives expiring after 2021, by end of the first quarter of 2021, other than for risk management of existing positions. In support of this milestone, FCA has engaged with interest rate swap liquidity providers as well as interdealer brokers to determine support for a change in the quoting conventions of sterling interest rate swaps in the interdealer market. An FCA survey of liquidity providers identified strong support for a change in the interdealer quoting convention that would see SONIA, rather than LIBOR, become the default price from October 27, 2020, subject to prevailing market conditions at that time. The survey also showed that a large majority supported a move away from the use of GBP LIBOR forward rate agreements to the use of single period swaps that benefit from greater compatibility with the anticipated ISDA IBOR fallbacks protocol.

    The switch to SONIA has been also endorsed by the Working Group on Sterling Risk-Free Reference Rates and has been included as an update to its roadmap for transition in sterling markets. BoE and FCA, therefore, support and encourage all participants in these interdealer markets to take the steps necessary to prepare for and implement these changes to market conventions. A previously planned initiative to accelerate a change in quoting conventions, which was due to have taken place in March 2020, was disrupted by the impact of COVID-19 pandemic. The changes with respect to convention switch would not prohibit trading in GBP LIBOR swaps, but they would mean that the primary source of pricing and liquidity will switch from GBP LIBOR swaps to SONIA swaps. This, in turn, should encourage a greater proportion of swap trading volumes to switch to SONIA.

     

    Related Links

    Keywords: Europe, UK, Banking, Securities, COVID-19, SONIA, LIBOR, Interest Rate Benchmarks, Interest Rate Swaps, Derivatives, FCA, BoE

    Featured Experts
    Related Articles
    News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    News

    IOSCO Welcomes Work on Sustainability-Related Corporate Reporting

    The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)

    September 15, 2022 WebPage Regulatory News
    News

    BoE Allows One-Day Delay in Statistical Data Submissions by Banks

    The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.

    September 14, 2022 WebPage Regulatory News
    News

    ACPR Amends Reporting Module Timelines Under EBA Framework 3.2

    The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.

    September 14, 2022 WebPage Regulatory News
    News

    ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies

    The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)

    September 13, 2022 WebPage Regulatory News
    News

    APRA to Modernize Prudential Architecture, Reduces Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.

    September 12, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8514