Featured Product

    BoE Issues Updates Related to Interest Rate Benchmark Reforms

    September 29, 2021

    The Bank of England (BoE) published the final Policy Statement on the proposal to modify the scope of contracts subject to the derivatives clearing obligation, which was set out in a consultation paper published in May 2021. The May consultation paper had proposed amendments to BTS 2015/2205 to incorporate modifications related to the derivatives clearing obligation to reflect the interest rate benchmark reform. Along with the Policy Statement, BoE published a proposal (also amending BTS 2015/2205) to add Overnight Index Swaps (OIS) that reference TONA to the scope of contracts that are subject to the derivatives clearing obligation. The consultation period ends on October 27, 2021 and this obligation is expected to come into force on or shortly after December 06, 2021.

    BoE proposed to introduce a clearing obligation for OIS that reference TONA, in light of certain announcements made by the Japanese authorities and the anticipated changes in market activity as a result of these announcements. The proposed modification will act as a replacement for the contract types referencing JPY LIBOR, which will be removed from the clearing obligation on December 06, 2021. The JPY LIBOR contract types that will be removed from the clearing obligation have a minimum maturity of 28 days, which differs to the 7 days proposed for the TONA OIS contract type. BoE is proposing to align the shortest maturity for TONA contracts with that of the existing contracts in the OIS class, while the maximum maturity will remain aligned with the soon to be removed JPY LIBOR contract types. The modification proposed in this consultation paper will not have retrospective effect. The over-the-counter (OTC )derivatives contracts referencing TONA that are concluded between counterparties before December 06, 2021, or shortly after (depending on when the change comes into force), will not be subject to the clearing obligation.

    The TONA OIS contract type in the clearing obligation will cover broadly the same maturity range as the JPY LIBOR contracts it is replacing. As with the changes consulted on in the May consultation paper, the date on which the proposed modification in this consultation comes into force will coincide with the date associated with the broader risk-free rate transition. The date will coincide with the contractual conversion of JPY LIBOR contracts by a number of central counterparties. Reflecting the international nature of OTC derivatives trading and clearing, BoE has discussed its proposed approach with several national and international authorities responsible for the equivalent clearing obligations in their jurisdictions. Subject to approval from the Her Majesty's Treasury, BoE intends to make and publish the amendment to BTS 2015/2205 by the end of November 2021. BoE also expects to consult on changes to the clearing obligation for the contract types referencing USD LIBOR in 2022. 

     

    Related Links

    Comment Due Date: October 27, 2021

    Keywords: Europe, UK, Banking, Securities, Derivatives Clearing Obligation, Interest Rate Benchmarks, Overnight Index Swaps, Benchmark Reforms, LIBOR, €STR, SONIA, OTC Derivatives, CCPs, EMIR, BTS 2015/2205, TONA, BoE

    Related Articles
    News

    PRA and FPC Finalize Changes to Leverage Ratio Framework in UK

    The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA

    October 08, 2021 WebPage Regulatory News
    News

    CFPB Proposes Rule on Small Business Lending Data Collection

    The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.

    October 08, 2021 WebPage Regulatory News
    News

    PRA Decides to Maintain O-SII Buffers for Another Year

    The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.

    October 08, 2021 WebPage Regulatory News
    News

    FSB Report Assesses Implementation of Recommendations on Stablecoins

    The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.

    October 07, 2021 WebPage Regulatory News
    News

    APRA Updates Loan Serviceability Expectations for Home Lending

    In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.

    October 06, 2021 WebPage Regulatory News
    News

    CPMI and IOSCO Consult on Guidance on Stablecoin Arrangements

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.

    October 06, 2021 WebPage Regulatory News
    News

    EBA and EIOPA Set Out Work Priorities for 2022

    The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.

    October 05, 2021 WebPage Regulatory News
    News

    MFSA Issues Reporting Updates and Guidance for Banks

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.

    October 05, 2021 WebPage Regulatory News
    News

    EC Publishes Decision on List of Equivalent Third Countries Under CRR

    The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).

    October 04, 2021 WebPage Regulatory News
    News

    EC Rule on Contractual Recognition of Write-Down and Conversion Powers

    EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.

    October 04, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7552