ISDA published a statement summarizing responses to the supplemental consultation on the spread and term adjustments that would apply to fallbacks for derivatives referencing euro LIBOR and EURIBOR. After considering the responses received from 57 entities, ISDA expects to proceed with developing fallbacks for inclusion in its standard definitions based on the compounded setting in arrears rate with a backward shift and the five-year historical median approach to the spread adjustment for EUR LIBOR and EURIBOR.
Majority of the respondents agreed with an implementation based on the "compounded setting in arrears rate approach with a backward-shift adjustment" and a spread adjustment based on a "historical median over a five-year lookback period," for fallbacks in derivatives referencing EUR LIBOR and EURIBOR and other less widely used interbank offered rates (IBORs). Respondents cited both support for the substance of these approaches and a strong desire to apply a consistent approach across all benchmarks covered by this supplemental consultation and the prior consultations.In the coming weeks, ISDA expects to publish additional information, including anonymized and aggregated responses to the supplemental consultation.
The supplemental consultation, which was launched in December 2019, covered technical issues related to the adjustment methodology and sought feedback on whether the adjustments would be appropriate for lesser-used IBORs if ISDA implements fallbacks for those benchmarks in the future. This supplemental consultation followed three earlier consultations—two setting out options for the adjustments that will apply to the relevant risk-free rates if fallbacks are triggered for derivatives referencing nine IBORs and one on the final parameters for the adjustment methodology.
Keywords: International, Banking, Securities, IBORs, LIBOR, Risk-free Rates, Interest Rate Benchmarks, EURIBOR, Fallback Provisions, Derivatives, Responses to Consultation, ISDA
Previous ArticleBCBS Updates Basel III Monitoring Workbook in February 2020
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.