Featured Product

    ISDA Paper Outlines Developments on Risk-Free Rate Adoption in 2020

    February 12, 2020

    ISDA published a research paper that examines several major upcoming developments on the adoption of risk-free rates in 2020. These developments include the publication of new benchmark fallbacks for derivatives contracts and central counterparty changes in discounting and price alignment interest for certain currencies. The transition from London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) is critical because of the issues associated with the robustness and viability of some IBORs, particularly LIBOR, given the sharp decline in activity in the unsecured interbank funding market.

    The paper notes the following key developments:

    • Calculation and publication by Bloomberg of IBOR fallback rates based on adjusted risk-free rates for key IBORs in the first half of 2020. Additionally, ISDA will publish amendments to the 2006 ISDA Definitions incorporating the adjusted risk-free rate fallbacks in new contracts referencing the covered IBORs. ISDA will also publish a protocol that will enable market participants to include the amended 2006 ISDA Definitions with fallbacks in legacy IBOR contracts.
    • Change of discounting and price alignment interest/price alignment amount by central counterparties for cleared euro-denominated derivatives from the Euro Overnight Index Average (EONIA) to the Euro Short-Term Rate (€STR) in June 2020.
    • Change of discounting and price alignment interest/price alignment amount by central counterparties for cleared US dollar-denominated interest rate derivatives from the Effective Federal Funds Rate (EFFR) to the Secured Overnight Financing Rate (SOFR) in October 2020.
    • Expected change of the market convention for sterling interest rate swaps from sterling LIBOR to Sterling Overnight Index Average (SONIA) on March 02, 2020.
    • Expected continued growth in the issuance of risk-free rate based cash products that will likely propel the need for hedging activity and increase the demand for risk-free rate based derivative products.


    Related Links

    Keywords: International, Banking, Securities, ISDA Definitions, ISDA Protocol, Risk-Free Rates, LIBOR, IBORs, Interest Rate Benchmark, Benchmark Fallbacks

    Related Articles

    EBA Launches Stress Tests for Banks, Issues Other Updates

    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.

    January 31, 2023 WebPage Regulatory News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    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.

    January 31, 2023 WebPage Regulatory News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    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.

    January 17, 2023 WebPage Regulatory News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    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.

    January 01, 2023 WebPage Regulatory News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    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.

    December 30, 2022 WebPage Regulatory News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    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.

    December 29, 2022 WebPage Regulatory News

    CBIRC Revises Measures on Corporate Governance Supervision

    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.

    December 29, 2022 WebPage Regulatory News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News

    EBA Updates Address Basel and NPL Requirements for Banks

    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.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8701