Featured Product

    EIOPA Sets Out Approach for IBOR Transition in EU

    September 30, 2021

    The European Insurance and Occupational Pensions Authority (EIOPA) published a report setting out its approach for the implementation of Interbank Offered Rate (IBOR) transitions. EIOPA will apply this methodology for the calculation of the risk-free interest rates for the first time in January 2022 for the British pound (GBP), Swiss franc (CHF), and Japanese yen (JPY), in accordance with the specified implementation approach. For the euro (EUR) and the US dollar (USD), EIOPA will not perform any major changes and will continue to monitor market developments closely. For the euro Credit Risk Adjustment (CRA), the overnight indexed swap (OIS) will change from EIONIA to ESTER in January 2022.

    The EIOPA methodology on IBOR transitions suggests that the change to the new curves shall take place instantaneously subject to several conditions that depend on whether the cessation of IBOR curve was announced and the time left before the cessation. The impact of the transition of the GBP, CHF, and JPY was estimated to be negligible for undertakings from the European Economic Area. It has been found that only a small number of undertakings, which are also well-capitalized, will be affected by this transition. EIOPA will implement the following changes from January 2022 onward:

    • GBP LIBOR curve will change to SONIA curve; the Last Liquid Point (LLP) will change from 50 to 30 years
    • CHF LIBOR curve will change to government bond curve; LLP will change from 25 to 15 years
    • JPY LIBOR curve will change to government bond curve and the LLP will remain unchanged at 30 years

    For the EUR, to this day, the transition remains uncertain since the EURIBOR is still very liquid and the discontinuation of the publication has not been decided. For the USD, the change is expected by mid-2023. Overall, the combined impact of the transition of the five currencies (EUR, GBP, CHF, JPY, and USD) was calculated to be on average -6.1% points to the solvency capital requirement (SCR) ratio, across the representative sample of 334 undertakings. In terms of impact, life and composite insurers seem to be the most affected compared to non-life insurers. To ensure a smooth transition, EIOPA will support market participants with the publication of two sets of curves (dual run) for three consecutive months prior to the transition date. 

     

    Related Links

    Keywords: Europe, EU, Insurance, LIBOR, EONIA, ESTER, Benchmark Reforms, IBOR, IBOR Transition, Risk-Free Rates, Benchmark Regulation, SCR, Solvency II, EIOPA

    Featured Experts
    Related Articles
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.

    January 13, 2022 WebPage Regulatory News
    News

    HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets

    The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.

    January 12, 2022 WebPage Regulatory News
    News

    FCA Registers Securitization Repositories; PRA Issues 2022 Priorities

    The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.

    January 12, 2022 WebPage Regulatory News
    News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News
    News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News
    News

    CBE Issues Additional Measures to Ease Disruptions from Pandemic

    The Central Bank of Egypt (CBE) published a circular with instructions on emergency liquidity assistance to banks that are unable to meet their liquidity requirements.

    January 10, 2022 WebPage Regulatory News
    News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7868