Featured Product

    EU Endorses Rules Addressing Cessation of Financial Benchmarks

    December 09, 2020

    European Council and Parliament reached an agreement on amending the Benchmark Regulation, which was also welcomed by EC. The agreed amendments are of key importance to avoid any systemic risks that might result from the phasing out of LIBOR by the end of 2021. The agreed amendments, proposed by EC in July 2020, to the Benchmark Regulation empower EC to designate a replacement benchmark that covers all references to a widely used reference rate that is phased out, such as LIBOR, when this is necessary to avoid disruption of the financial markets in EU. The European Parliament and the Council also agreed to postpone the entry into application of the rules on third-country benchmarks until December 31, 2023, with the possibility of an extension by EC afterward. The agreed amendments will apply immediately after their publication in the Official Journal of the European Union.

    The amendments to the Benchmark Regulation aim to ensure that a statutory replacement benchmark can be established by the regulators by the time a systemically important benchmark is no longer in use and, thus, protect financial stability on EU markets. The new rules give EC the power to replace "critical benchmarks," which could affect the stability of financial markets in Europe, and other relevant benchmarks, if their termination would result in a significant disruption in the functioning of financial markets in  EU. The agreement on the proposed changes is very timely, as the UK FCA, the supervisor of LIBOR, announced that it will stop supporting this benchmark at the end of 2021 and expects its cessation shortly thereafter. As per the new rules, EC will be able to replace third-country benchmarks if their cessation would result in a significant disruption in the functioning of financial markets or if they pose a systemic risk for the financial system in EU. Thus, a statutory benchmark will replace the benchmarks in financial instruments and contracts that contain either no contractual replacement or a fallback provision that is deemed unsuitable by regulators. In the amended rules, a framework is also provided for the replacement of a benchmark through national legislation.

    The European Council and the Parliament have extended the transition period to ensure a smooth transition to the new rules for the use of third-country benchmarks. The EU supervised entities will be able to use such benchmarks until the end of 2023. EC may further extend this period until the end of 2025 in a delegated act to be adopted by June 15, 2023, if it is deemed necessary in a report that is to be presented by that time. The EC report will also assess whether the legislation concerning the use of third-country benchmarks by EU supervised entities needs to be amended; the report will be accompanied by a legislative proposal, as appropriate. The Parliament and the Council will adopt the amendments without further discussion as soon as possible.


    Related Links

    Keywords: Europe, EU, Banking, Securities, LIBOR, Interest Rate Benchmarks, Benchmarks Regulation, Benchmark Reforms, Systemic Risk, European Council, European Parliament, EC

    Featured Experts
    Related 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.

    March 13, 2023 WebPage Regulatory News

    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.

    March 12, 2023 WebPage Regulatory News

    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.

    March 03, 2023 WebPage Regulatory News

    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.

    March 02, 2023 WebPage Regulatory News

    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.

    February 28, 2023 WebPage Regulatory News

    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.

    February 28, 2023 WebPage Regulatory News

    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.

    February 28, 2023 WebPage Regulatory News

    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

    February 24, 2023 WebPage Regulatory News

    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.

    February 21, 2023 WebPage Regulatory News

    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

    February 20, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8793