ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265. The tasks and responsibilities of ECB provided for in Guideline 2019/1265 are being updated with respect to the calculation and publication of compounded rates. The framework to consult stakeholders, which is provided for in Article 14 of the Guideline 2019/1265, is also being updated to enhance clarity. The amended guideline shall take effect on the day of its notification to the national central banks of the member states whose currency is EUR. The national central banks shall comply with the amended guideline at the latest from April 15, 2021.
The Benchmarks Regulation (2016/1011) necessitates the adoption of robust fallback provisions in a large number of financial contracts and instruments. In the absence of such fallback provisions, the possible discontinuation in the future of a critical benchmark such as EURIBOR, may have serious repercussions for the functioning of markets and, thus, for the implementation of monetary policy. Overnight rates compounded in arrears are one viable fallback option being recommended by FSB and market participants support the introduction of such rates. Thus, the publication of compounded rates based on historical €STR values by ECB can contribute to mitigating systemic risk in the scenarios of benchmark discontinuation, while promoting a wider use of the €STR and fostering consistency across major currency areas in the fallback options available to market participants.
Related Links
Keywords: Europe, EU, Banking, Securities, €STR, Interest Rate Benchmark, Benchmarks Regulation, Guideline 2019/1265, Fallback Provisions, EURIBOR, Compounded Rates, Guideline 2021/565, ECB
Previous Article
EBA Consults on Standards Related to FRTB-SANext Article
ESAs Publish Report on Activities of Joint CommitteeRelated Articles
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
