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
    News

    BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks

    A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.

    July 29, 2022 WebPage Regulatory News
    News

    EBA Publishes Multiple Regulatory Updates for Regulated Entities

    The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.

    July 29, 2022 WebPage Regulatory News
    News

    APRA Consults on Prudential Standard for Operational Risk

    The Australian Prudential Regulation Authority (APRA) is seeking comments, until October 21, 2022, on the introduction of CPS 230, which is the new cross-industry prudential standard on operational risk management.

    July 28, 2022 WebPage Regulatory News
    News

    EC Amends Rule on Securitizations; ESRB Updates Reciprocation Measures

    The European Commission published a Delegated Regulation 2022/1301 on the information to be provided in accordance with the simple, transparent, and standardized (STS) notification requirements for on-balance-sheet synthetic securitizations.

    July 27, 2022 WebPage Regulatory News
    News

    APRA Announces Revisions to Capital Framework for Banks

    The Australian Prudential Regulation Authority (APRA) is announced revisions to the capital framework for authorized deposit-taking institutions to implement the "unquestionably strong" capital ratios and the Basel III reforms.

    July 26, 2022 WebPage Regulatory News
    News

    EBA Examines Remuneration Data and Use of Large Exposure Exemptions

    The European Banking Authority (EBA) published a report that examines the use of certain exemptions included in the large exposures regime under the Capital Requirements Regulation (CRR).

    July 22, 2022 WebPage Regulatory News
    News

    UK Authorities Publish Discussion Paper on Critical Third Parties

    The Bank of England (BoE), the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) published a joint discussion paper that sets out potential measures to oversee and strengthen the resilience of services provided by critical third parties to the financial sector in UK.

    July 22, 2022 WebPage Regulatory News
    News

    BoE Issues Update on Ongoing Data Transformation Program

    The Bank of England (BoE) issued a communication to firms to provide an update on the progress of the joint data transformation program—which is being led by BoE, the Financial Conduct Authority (FCA), and the industry—for the financial sector in UK.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues Draft Methodology and Templates for 2023 Stress Tests

    The European Banking Authority (EBA) published the draft methodology, templates, and template guidance for the European Union-wide stress test in 2023.

    July 21, 2022 WebPage Regulatory News
    News

    EBA Issues SREP Guidelines and Standards for Investment Firms

    The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published the final guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms.

    July 21, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8407