European Council adopted the Benchmark Regulation (2016/1011) amendments, which address the termination of financial benchmarks. The amendments have been made against the background of an expected phasing-out of the London Inter-Bank Offered Rate (LIBOR) by the end of 2021. The new rules are intended to reduce legal uncertainty and avoid risks to financial stability by making sure that a statutory replacement rate can be put in place by the time a systemically important benchmark is no longer in use. The adopted text of the regulation shall enter into force and apply from the day following that of its publication in the Official Journal of the European Union.
Under the new framework, EC will have the power to replace "critical benchmarks," which could affect the stability of financial markets in EU, and other relevant benchmarks, if their termination would result in a significant disruption in the functioning of financial markets in EU. EC will also be able to replace third-country benchmarks if their cessation would result in a significant disruption in the functioning of financial markets or pose a systemic risk for the financial system in the EU. The new rules also cover the replacement of a benchmark designated as critical in one member state, through national legislation.
In addition, the amendments to the Benchmark Regulation extend the transition period for the use of third-country benchmarks until the new rules governing the use of such benchmarks are applied. EU-supervised entities will be able to use third-country 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 provides evidence that this is necessary in a report to be presented by that time. The adopted text of the regulation will be signed on February 10 and is expected to be published in the Official Journal of the European Union on February 12.
Effective Date: OJ+1 Day
Keywords: Europe, EU, Banking, Securities, LIBOR, Interest Rate Benchmark, Benchmark Reforms, Systemic Risk, Benchmark Regulation, EC, European Regulation
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Previous ArticleEC Calls on ESAs to Advise on Digital Finance and Related Issues
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.