Featured Product

    FSB Publishes User Guide for Overnight Risk-Free Rates

    June 04, 2019

    FSB published a user guide for overnight risk-free rates. The guide provides an overview of the risk-free rates, details how these rates are calculated, and presents options on how the overnight risk-free rates can be used in cash products. The guide is intended to encourage adoption of these rates where they are appropriate.

    The document is based on a recent paper published by the Alternative Reference Rates Committee (ARRC) and the recent work of the National Working Group on Swiss Franc Reference Rates (CHF NWG). It intends to broaden the usage of risk-free rates to other currency areas. Risk-free rates are overnight rates that can be used as alternative benchmarks for the existing key interbank offered rates (IBORs) in the unsecured lending markets. FSB has welcomed the progress, by public authorities and private-sector working groups, in identifying and developing risk-free rates in many currency areas. Risk-free rates have been identified because these rates are robust and are anchored in active, liquid underlying markets. This contrasts with the scarcity of underlying transactions in the term interbank and wholesale unsecured funding markets from which some IBORs are constructed.

    National working groups in several currency areas are also pursuing the development of forward-looking term rates derived from risk-free rate derivative markets. FSB recognizes that there may be a role for such rates for certain cash products. Nevertheless, FSB has stated that it considers that the greater robustness of overnight risk-free rates makes them a more suitable alternative than a forward-looking term risk-free rates in the bulk of cases where an IBOR is currently used. This guide focuses on risk-free rates and not on forward-looking term rates. In derivatives markets, where there is a long history of use of overnight rates, many market participants are already quite familiar with the various structures of using such rates. Although there are many examples of the use of overnight rates in cash products, fewer participants in these markets are familiar with them. FSB encourages the development and adoption of such overnight risk-free rates where appropriate—for example, in business where term properties are not needed or where exposure to bank credit risk is not necessary or desirable—to enhance financial stability.

     

    Related Links

    Keywords: International, Banking, Securities, Risk-free Rates, IBOR, Financial Stability, Interest Rate Benchmark, FSB

    Related Articles
    News

    APRA Publishes Proposal to Increase Transparency of Banking Data

    APRA proposed to substantially increase the volume and breadth of data it makes publicly available on authorized deposit-taking institutions, including banks, credit unions, and building societies.

    December 05, 2019 WebPage Regulatory News
    News

    ESMA Consults on Guide to Internal Controls for Credit Rating Agencies

    ESMA launched a consultation on the guidelines on internal controls for credit rating agencies (CRAs).

    December 05, 2019 WebPage Regulatory News
    News

    EU Finalizes Directive and Prudential Rules for Investment Firms

    EU published, in the Official Journal of the European Union, the Directive (2019/2034) and Regulation (2019/2033) on the prudential requirements and supervision of investment firms.

    December 05, 2019 WebPage Regulatory News
    News

    OSFI Revises Guideline on Principles for Management of Liquidity Risk

    OSFI finalized Guideline B-6 on the principles for the management of liquidity risk.

    December 05, 2019 WebPage Regulatory News
    News

    PRA Consults on Framework to Manage Outsourcing and Third-Party Risk

    PRA published a consultation paper CP30/19 that sets out proposals to modernize the regulatory framework on outsourcing and third-party risk management.

    December 05, 2019 WebPage Regulatory News
    News

    BoE, PRA, and FCA Consult to Strengthen Operational Resilience

    BoE, PRA, and FCA published a shared policy summary and coordinated consultation papers on new requirements to strengthen operational resilience in the financial services sector.

    December 05, 2019 WebPage Regulatory News
    News

    EC Amends Rule on Mapping of External Credit Assessment Institutions

    EC published the implementing regulation (EU) 2019/2028, which amends Regulation 2016/1799, regarding the mapping tables specifying correspondence between the credit risk assessments of external credit assessment institutions (ECAIs) and the credit quality steps set out in the Capital Requirements Regulation.

    December 04, 2019 WebPage Regulatory News
    News

    EBA Issues Second Part of Advice on Implementation of Basel III in EU

    EBA published the second part of its advice on the implementation of Basel III in EU, which complements the report published on August 05, 2019.

    December 04, 2019 WebPage Regulatory News
    News

    EU Approves European Council Proposal on CCP Recovery and Resolution

    EU ambassadors approved the position of European Council on a proposed framework for clearing houses and their authorities to prepare for and deal with financial difficulties.

    December 04, 2019 WebPage Regulatory News
    News

    OSFI Releases Guideline on Foreign Bank Branch Deposit Requirements

    OSFI released the final version of Guideline A-10 on foreign bank branch deposit requirements, along with guideline impact analysis statement.

    December 04, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4268