Featured Product

    EC Proposes Amendments to Benchmarks Regulation

    July 24, 2020

    EC proposed amendments to the EU Benchmarks Regulation to address risks of the expected phase-out of LIBOR at the end of 2021. The proposal intends to create a new framework to have a statutory replacement rate in place by the time LIBOR is no longer in use. A statutory replacement rate is a rate that EC can designate by law. Such a rate would take the place of LIBOR in all contracts and financial instruments that mature after 2021. EC also proposed an amendment to allow EU users to continue using the currency benchmarks provided outside EU.

    Benchmarks are indices used to price financial instruments (bonds, loans, derivatives) and contracts (including households' mortgages) or to measure the performance of an investment fund. If a critical benchmark ceases to be published, thousands of contracts existing at the date of cessation can be disrupted and could, ultimately, threaten financial stability. Thus, EC proposed to amend the Benchmarks Regulation, which will empower EC to designate a replacement benchmark that covers all references to a widely used reference rate that is phased out, such as LIBOR, when this is necessary to avoid disruption of the financial markets in EU. EC could replace any reference to LIBOR with a reference to a suitable replacement rate. In selecting this replacement rate, EC will take into account recommendations made by the relevant industry working groups, such as the US Alternative Reference Rates Committee for the LIBOR or the Working Group on Euro Risk-Free Rates for the EURIBOR.

    The statutory replacement rate will only be available for financial contracts that reference, for example LIBOR, at the time this benchmark ceases to be published. The powers of EC to designate a statutory successor for LIBOR would only apply to contracts concluded by supervised entities, such as banks, investment firms, or asset managers, as only these contracts are governed by the Benchmarks Regulation. Contracts that do not involve supervised entities would not benefit from the statutory replacement rate.  For such non-supervised entities, the laws of the member states would need to extend the scope of the harmonized statutory replacement rate to also cover non-supervised entities. At an appropriate time, EC might recommend that national laws supplement the harmonized replacement rate that applies to supervised entities. EC is also considering setting up a working group with member states to ensure the smooth transition of all LIBOR referencing contracts to the statutory replacement rate in a uniform way.

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Benchmarks Regulation, LIBORs, Financial Benchmarks, EC, FCA

    Related Articles
    News

    EBA Publishes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.

    May 23, 2022 WebPage Regulatory News
    News

    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).

    May 23, 2022 WebPage Regulatory News
    News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News
    News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News
    News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    News

    EU to Amend Credit Risk Adjustment Rules; ESAs Submit Queries on SFDR

    The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    May 13, 2022 WebPage Regulatory News
    News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.

    May 12, 2022 WebPage Regulatory News
    News

    MAS Amends Notice 635 and Issues Second Proposal on Green Taxonomy

    The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.

    May 12, 2022 WebPage Regulatory News
    News

    EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA

    The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.

    May 11, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8201