Featured Product

    BoE Responds to Feedback on SONIA Compounded Index and Period Averages

    June 11, 2020

    BoE published its response to the market feedback on the discussion paper on risk-free rate transition through the provision of compounded Sterling Overnight Index Average or SONIA. BoE also published the feedback received on the discussion paper. The discussion paper was released in February 2020 and sought views on the intention of BoE to publish a daily SONIA Compounded Index and on the usefulness of publishing a simple set of compounded SONIA “period averages.” BoE also released a spreadsheet on illustrative series of the SONIA Compounded Index data. The spreadsheet includes illustrative calculations, based on published SONIA data, which are intended only to show how the SONIA Compounded Index would work and should not be used for any other purpose.

    BoE received responses from 41 stakeholders, the large majority of whom were banks and other financial institutions. BoE has reviewed the feedback to the discussion paper and has set out its position:

    • There was near-unanimous support for intention of BoE to produce a SONIA Compounded Index. Respondents agreed that an index could help to provide a standardized way of calculating compounded rates, particularly for less sophisticated counterparts that may not have access to detailed financial data. There was also a high degree of support for the proposed methodology. BoE, therefore, confirms that it will produce the SONIA Compounded Index using the methodology described in the discussion paper. BoE anticipates that it will commence the publication of the SONIA Compounded Index in early August. The precise date will be confirmed in due course.
    • A number of respondents suggested additional indices or data that might be produced by BoE. These proposals have been reviewed carefully by BoE, which is also aware of ongoing discussions on how best to use risk-free rates in sterling and non-sterling loan markets. Any further work in this area would, however, require both a definitive market consensus on specific additional conventions and a clear cost-benefit case. Consistent with the design principles of simplicity and wide utility set out in the discussion paper, BoE is not minded to produce additional indices or data at this time.
    • On the question of BoE producing a set of “period averages,” a number of the respondents noted that they would not use the period averages in financial contracts. Additionally, a significant minority—including all trade bodies who responded (representing a range of banks, intermediaries, and small and large end-users)—said BoE should not produce such period averages. Given a lack of consensus on both the usefulness of SONIA period averages and the conventions underpinning such rates, in line with the position set out in the February discussion paper, BoE will not be producing The SONIA period averages at this time.

     

    Related Links

    Keywords: Europe, UK, Banking, Insurance, Securities, SONIA, LIBOR, Interest Rate Benchmarks, Reference Rates, Risk-Free Rates, BoE

    Related Articles
    News

    APRA Finalizes Guidance on Management of Climate Change Risks

    The Australian Prudential Regulation Authority (APRA) released the final Prudential Practice Guide on management of climate change financial risks (CPG 229) for banks, insurers, and superannuation trustees.

    November 26, 2021 WebPage Regulatory News
    News

    European Council Adopts Position on Digital Finance Package Proposals

    The European Council adopted its position on two proposals that are part of the digital finance package adopted by the European Commission in September 2020, with one of the proposals involving the regulation on markets in crypto-assets (MiCA) and the other involving the Digital Operational Resilience Act (DORA).

    November 25, 2021 WebPage Regulatory News
    News

    PRA Proposes Rulebook Changes; BoE Extends BEEDS Testing Window

    The Prudential Regulation Authority (PRA) is proposing, via the consultation paper CP21/21, to apply group provisions in the Operational Resilience Part of the PRA Rulebook (relevant for the Capital Requirements Regulation or CRR firms) to holding companies.

    November 25, 2021 WebPage Regulatory News
    News

    EC Proposes New Measures Under Capital Markets Union Package

    The European Commission (EC) has adopted a package of measures related to the Capital Markets Union.

    November 25, 2021 WebPage Regulatory News
    News

    EBA Publishes Standards to Calculate Risk-Weights of CIUs Under CRR

    The European Banking Authority (EBA) published the final report on draft regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment undertakings or CIUs, in line with the Capital Requirements Regulation (CRR).

    November 24, 2021 WebPage Regulatory News
    News

    FED Outlines Lending Conditions and Supervisory Activities in H1 2021

    The Board of Governors of the Federal Reserve System (FED) published a report that summarizes banking conditions in the United States, along with the supervisory and regulatory activities of FED.

    November 24, 2021 WebPage Regulatory News
    News

    APRA Expects Boards to Strengthen Ability to Oversee Cyber Resilience

    The Australian Prudential Regulation Authority (APRA) recently completed two pilot initiatives in its 2020-2024 Cyber Security Strategy, which was published in November 2020.

    November 23, 2021 WebPage Regulatory News
    News

    FSB Updates List of Global Systemically Important Banks

    The Basel Committee on Banking Supervision (BCBS) published further information related to its 2021 assessment of global systemically important banks (G-SIBs), with additional details to help understand the scoring methodology.

    November 23, 2021 WebPage Regulatory News
    News

    FASB Proposes Improvements to Credit Losses Standard

    The Financial Accounting Standards Board (FASB) is consulting on an Accounting Standards Update and the associated taxonomy improvements for requirements on troubled debt restructurings and vintage disclosures under the credit losses standard (for financial instruments) topic 326.

    November 23, 2021 WebPage Regulatory News
    News

    US Agencies Issue Statement on Crypto-Asset Policy Initiatives

    US Agencies issued a statement that summarizes the work undertaken during the interagency policy sprints focused on crypto-assets and provides a roadmap of future work related to crypto-assets.

    November 23, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7733