Featured Product

    ECB Recommendations Address Impact of Transition from EONIA to €STR

    August 19, 2019

    ECB published report on a set of recommendations addressing the impact of transition from the euro overnight index average (EONIA) to the euro short-term rate (€STR). The recommendations take an operational and valuation perspective, taking into account EONIA’s wide use as a reference rate and as a collateral remuneration and cash flow discounting rate. The report, by the private sector working group on euro risk-free rates, analyzes various financial products and processes affected by the transition, covering secured and unsecured cash products, securities, investment funds, derivatives, and models referencing EONIA.

    The report urges market participants to prepare for the change in the publication time of EONIA from day T at 19:00 CET to the next business day T+1 at 9:15 CET that will follow the change in EONIA’s methodology as of October 02, 2019 (representing transactions executed on October 01, 2019). Regarding the change in publication time of EIONIA resulting from the planned recalibration of EONIA as the €STR, plus a fixed spread of 8.5 basis points as at October 02, 2019, the working group encourages market participants, among other things, to:

    • Screen the inventory of affected transactions and system environments to assess the modifications needed to cope with the change in the publication time of EONIA and prepare relevant teams for enhanced oversight during the cut-over period
    • Design a communication strategy geared toward internal and external stakeholders (clients in particular) to ensure awareness of impending changes
    • Consider adjusting the default settlement time (that is, the lag between the last fixing date and the settlement date) in certain cases

    The report also urges market participants to prepare for the discontinuation of EONIA on January 03, 2022. In this context, the working group recommends, among other things, that:

    • Market participants actively transition floating rate options (FROs) referencing EONIA to €STR FROs before the end of 2021
    • Central counterparty (CCPs) clearing houses align their discounting switch dates as much as possible to transition from an EONIA discounting regime to a €STR discounting regime and set the discounting switch date as early as possible, preferably toward the end of the second quarter of 2020
    • Market participants introduce all necessary modifications to be able to issue, buy, trade, and manage new securities indexed to the €STR and avoid issuing new securities indexed to EONIA with maturities going beyond the transition period


    Related Links

    Keywords: Europe, EU, Banking, Securities, EONIA, €STR, Risk-Free Rates, Recommendations, CCPs, Interest Rate Benchmarks, ECB

    Related Articles
    News

    ESMA Releases Enforcement Priorities for 2019 Annual Financial Reports

    ESMA published a statement on the priorities that European enforcers will consider when examining the 2019 annual financial reports of listed companies.

    October 22, 2019 WebPage Regulatory News
    News

    EC Consults on Alternative Standardized Approach for Market Risk

    EC is consulting on a delegated regulation amending the Capital Requirements Regulation (CRR) with regard to the alternative standardized approach for market risk.

    October 21, 2019 WebPage Regulatory News
    News

    CPMI Report Examines Impact of Global Stablecoins

    This report by the G7 Working Group on Stablecoins finds that stablecoins, regardless of size, have implications ranging from anti-money laundering efforts across jurisdictions to operational resilience (including for cyber security), consumer or investor and data protection, and tax compliance.

    October 18, 2019 WebPage Regulatory News
    News

    BoE Announces Date for Publication of Stress Test Results for Banks

    BoE announced its plans to publish results of the full UK annual stress tests on December 10, 2019.

    October 18, 2019 WebPage Regulatory News
    News

    US Agencies Request Comments on Use and Impact of CAMELS Ratings

    US Agencies (FDIC and FED) are seeking information and comments from interested parties regarding the consistency of ratings assigned by the agencies under the Uniform Financial Institutions Rating System (UFIRS).

    October 18, 2019 WebPage Regulatory News
    News

    PRA Consults on Approach to Supervising Liquidity and Funding Risks

    In consultation paper (CP27/19), PRA published a proposal (CP27/19) to update the supervisory statement SS24/15 on the PRA approach to supervising liquidity and funding risk.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Consult on Policy Statement on Allowance for Credit Losses

    US Agencies (FDIC, FED, NCUA, and OCC) are consulting on the policy statement on allowances for credit losses and on the guidance on credit risk review systems.

    October 17, 2019 WebPage Regulatory News
    News

    FSI Paper Examines Use of Suptech Initiatives by Financial Authorities

    The Financial Stability Institute (FSI) of BIS published a paper that examines the suptech developments by analyzing suptech initiatives of 39 financial authorities globally.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Publish Notice to Extend Form FFIEC 102 for Three Years

    US Agencies (FDIC, FED, and OCC) published a joint notice regarding extension of the market risk regulatory report for institutions subject to the market risk capital rule (FFIEC 102).

    October 17, 2019 WebPage Regulatory News
    News

    ECB Publishes Recommendations on Euro Risk-Free Rates Transition

    ECB published a report, by private sector working group on euro risk-free rates, which contains recommendations, from a risk management perspective, on the transition to new risk-free rates.

    October 17, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4006