ISDA Announces Start of Publication of Calculations for IBOR Fallbacks
ISDA and Bloomberg announced that Bloomberg Index Services Limited (BISL) has begun calculating and publishing fallbacks that ISDA intends to implement for certain key interbank offered rates (IBORs). Benchmark fallbacks are replacement rates that would apply to derivatives trades referencing a particular benchmark. These would take effect if the relevant benchmark becomes unavailable while market participants continue to have exposure to that rate. Specific fallback rates are set out in the 2006 ISDA Definitions. ISDA will soon publish amendments to its standard interest rate derivatives definitions to incorporate these new fallbacks, which are adjusted versions of various risk-free rates. ISDA also published a fact sheet on the new fallbacks.
Risk-free rates are overnight rates without a credit component and are inherently different from IBORs, which have term structures and credit sensitive elements. Accordingly, ISDA is implementing adjusted versions of the risk-free rates to serve as IBOR fallbacks based on the feedback received from several market consultations regarding these differences. Calculations published by BISL include the adjusted risk-free rate (compounded in arrears), the spread adjustment, and the "all in" IBOR fallback rates for the following IBORs across various tenors: the Australian dollar Bank Bill Swap Rate (BBSW), the Canadian Dollar Offered Rate (CDOR), Swiss franc LIBOR, EURIBOR, EUR LIBOR, Sterling LIBOR, HIBOR, Euroyen TIBOR, Yen LIBOR, TIBOR, and the USD LIBOR.
Bloomberg will make the adjusted risk-free rates, spread adjustments, and all-in fallback rates broadly available to industry participants through various distribution channels, including the Bloomberg Terminal® and other Bloomberg solutions such as the desktop API and Bloomberg Data License. The real-time data will also become available through authorized redistributors and will be publicly available on the Bloomberg website on a delayed basis. While the fallbacks are not separate benchmarks from the risk-free rates for regulatory purposes, the calculations are being performed by BISL, which has been authorized by FCA as a regulated UK benchmark administrator under the EU Benchmarks Regulation. BISL has conducted index administration since 2014, including serving as the administrator of the Bloomberg Barclays fixed-income indices.
Related Link
Keywords: International, Banking, Securities, IBORs, LIBOR, Risk-Free Rates, BISL, Interest Rate Benchmarks, Benchmark Fallbacks, Benchmark Reforms, ISDA
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.
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.
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.
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.
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.
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.
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.
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.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
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.
