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    FSB Publishes Progress Report on Interest Rate Benchmark Reforms

    December 18, 2019

    FSB published the annual progress report on implementation of the FSB recommendations to reform major interest rate benchmarks. The report emphasizes that the continued reliance of global financial markets on LIBOR poses risks to financial stability; this calls for significant and sustained efforts by the official sector and by financial and non-financial firms across many jurisdictions to transition away from LIBOR by the end of 2021. The report covers progress from reforms to LIBOR, EURIBOR, TIBOR, USD, EUR, JPY, GBP, and CHF, in addition to the progress on the currencies in Australia, Brazil, Canada, Hong Kong, Indonesia, Mexico, Singapore, South Africa, and Turkey.

    Interest rate benchmarks play a key role in global financial markets. In 2014, FSB recommended reforms for interbank offered rates (IBORs) in response to the cases of attempted manipulation and the decline in liquidity in key interbank unsecured funding markets. The report sets out progress on implementing the FSB recommendations and finds that:

    • There is a common view across FSB jurisdictions that the use of overnight risk-free rates should be encouraged across global interest rates markets, where appropriate, and that contracts referencing IBORs should have robust fallbacks.
    • There has been good progress in many derivatives and securities markets but transition in lending markets has been slower and needs to accelerate.
    • Firms undertaking their transition away from LIBOR should not delay their programs until the emergence of possible forward-looking term versions of risk-free rates.
    • The parallel efforts on transition across multiple jurisdictions and currencies are an opportunity to align conventions and other practices across currencies and products.
    • Transition requires significant commitment from the official sector, working alongside market participants.
    • Given the degree of risk arising from the continued reliance on LIBOR, regulated firms should expect increasing scrutiny of their transition efforts as the end of 2021 approaches

    As part of its 2020 work program, FSB announced that it will conduct a survey of exposures to LIBOR and supervisory measures being taken to address benchmark transition issues, with the aim to improve collective understanding of LIBOR transition progress so far and to increase awareness of the importance of ensuring timely transition. In July 2020, FSB plans to deliver to the G20 Finance Ministers and Central Bank Governors , and publish, a report on the remaining challenges to benchmark transition.


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