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    EC Finalizes Rules Related to Solvency II and Benchmarks in EU

    August 13, 2021

    The European Commission (EC) published the Implementing Regulation 2021/1354 that lays down technical information for calculation of technical provisions and basic own funds. This technical information is relevant for reporting with reference dates from June 30, 2021 to September 29, 2021, in accordance with the Solvency II Directive. Annex I to the Regulation 2021/1354 sets out the relevant risk-free rate term structures to calculate the best estimate, Annex II provides the fundamental spreads for calculation of the matching adjustment, and Annex III includes the volatility adjustments to the relevant risk-free interest rate term structure. The regulation entered into force on the day following that of its publication in the Official Journal of the European Union. It shall apply from June 30, 2021.

    EC also published four Delegated Regulations that supplement the Benchmarks Regulation (2016/1011) and shall enter into force on the twentieth day following that of their publication in the Official Journal of the European Union. Following are the recently published Delegated Regulations, all of which shall apply from January 01, 2022: 

    • Delegated Regulation 2021/1348 lays down regulatory technical standards specifying the criteria under which competent authorities may require changes to the compliance statement of non-significant benchmarks.
    • Delegated Regulation 2021/1349 lays down regulatory technical standards specifying the criteria for the competent authorities’ compliance assessment regarding the mandatory administration of a critical benchmark. This regulation specifies the criteria that competent authorities shall consider, when assessing how a critical benchmark is to be ceased to be provided. It also specifies the criteria that competent authorities shall consider, when assessing how a critical benchmark is to be transitioned to a new administrator.
    • Delegated Regulation 2021/1350 lays down regulatory technical standards specifying the requirements to ensure that an administrator’s governance arrangements are sufficiently robust. The governance arrangements of benchmark administrators shall provide for an organizational structure that in a clear and documented manner specifies procedures for management decision-making, internal reporting lines and the allocation of functions and responsibilities of the persons involved in the provision of a benchmark.
    • Delegated Regulation 2021/1352 lays down regulatory technical standards specifying the conditions to ensure that the methodology for determining a benchmark complies with the quality requirements. This regulation includes conditions to ensure that the benchmark methodology has clear rules identifying how and when discretion may be exercised in the determination of the benchmark, as well as conditions to ensure that the benchmark methodology is rigorous, continuous, and capable of validation including, where appropriate, back-testing against available transaction data.

     

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    Effective Date: August 14, 2021/September 02, 2021

    Keywords: Europe, EU, Banking, Insurance, Solvency II, Reporting, Technical Provisions, Volatility Adjustment, Matching Adjustment, Benchmarks Regulation, Regulatory Technical Standards, Critical Benchmarks, Interest Rate Benchmark, EC

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