Featured Product

    PBC Discusses Progress Toward Interest Rate Benchmark Reform in China

    August 31, 2020

    PBC published information on the preparations for implementing the interest rate benchmark reforms in China. This information was published in the form of a white paper, which covers plans of China to participate in the international interest rate benchmark reforms and its progress in this area. The paper also discusses the roadmap and timetable for benchmark transitions in the domestic market.

    The paper highlights that PBC has actively participated in international interest rate benchmark reform and guided the Self-Regulatory Mechanism for Market Rate Pricing in setting up a special working group as well as carrying out a series of research. By now, it has become clear that international interest rate benchmark transitions, including LIBOR, in domestic market will follow the general idea of mainly referring to international consensus and best practices and will actively promote the application of new benchmark interest rates. PBC has instructed the development of the roadmap and the timetable with respect to the benchmark transitions in domestic market, organized in-depth research, and instructed relevant banks to initiate preparation for benchmark transitions as soon as possible.

    These preparations include participating in the design and application of new benchmark interest rates, promoting benchmark transitions of new contracts, and exploring the benchmark transition arrangements for the legacy contracts. After the benchmark transition plan for new contract have been determined and finalized, PBC will instruct the LIBOR Working Group to publish the recommended fallback languages, providing guidance to financial institutions to formulate their own customized transition plans accordingly. PBC will instruct the LIBOR Working Group, with reference to international experiences, to provide clarifications on elements of fallback arrangements including triggers, benchmark transition dates, alternative interest rate benchmarks, spread adjustment, interest accruing method and relevant market conventions. PBC will also urge National Association of Financial Market Institutional Investors (NAFMII) to revise relevant derivatives agreements and definitions as soon as possible. 

    The paper adds that China has cultivated a series of benchmark interest rates based on actual transactions since the establishment of domestic interbank market, which provides first-mover advantages. Depository-Institutions Repo Rate (DR), government bond yield, and Loan Prime Rate (LPR) have played a significant role as benchmark interest rates in corresponding financial market, providing relatively good reference in observing market operation and guiding financial product pricing. Overall, the benchmark interest rates of China based on actual transactions have been in operation for a long time and China possesses full-scale market transaction data with transparency and availability. PBC has conducted in-depth research and proposed ideas and plans to improve benchmark interest rates of China and the market-based interest rate system, with focus on Depository-Institutions Repo Rate. The next development priority of interbank benchmark interest rate system of China is to promote a wide application of various benchmark interest rates. Efforts will be made in innovating and broadening the application of Depository-Institutions Repo Rate in financial products, including floating-rate bonds and floating-rate interbank certificate of deposits, so as to make the Depository-Institutions Repo Rate a key reference indicator for monetary policy management and financial market pricing in China.


    Keywords: Asia Pacific, China, Banking, Securities, Interest Rate Benchmarks, Benchmark Reforms, LIBOR, Depository Institutions Repo Rate, PBC

    Related Articles

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News

    ECB Sets Deadline for Banks to Meet Its Climate Risk Expectations

    The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.

    November 02, 2022 WebPage Regulatory News

    ESAs, ECB, & EC Issue Multiple Regulatory Updates for Financial Sector

    Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)

    October 31, 2022 WebPage Regulatory News

    EC Adopts Final Rules Under CRR, BRRD, and Crowdfunding Regulation

    The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)

    October 26, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8582