Featured Product

    FSB Letter to ISDA on Ensuring Robustness of Derivatives Contracts

    March 15, 2019

    Co-chairs of the Official Sector Steering Group (OSSG) of FSB issued a letter encouraging ISDA to continue its work on the contractual robustness of derivatives to risks of interest rate benchmark discontinuation. The letter highlights that the measures that ISDA is taking will play an important role in the transition from LIBOR and will serve to strengthen contract language in derivatives referencing other Interbank Offered Rates (IBORs). The adoption of appropriately revised fallbacks by market participants will help to mitigate a key source of risk to the financial system.

    The letter raises three important issues that the OSSG believes ISDA is moving to address:

    • The addition of other trigger events. The letter encourages ISDA to ask for market opinion on the events that would trigger a move to the spread-adjusted fallback rate for derivatives referencing IBORs. Triggers that would only take effect on the date on which LIBOR permanently or indefinitely stopped publication could leave those with LIBOR-referencing contracts still exposed to a number of risks.
    • The timing for an ISDA consultation on USD LIBOR and certain other key IBORs. The OSSG also understands that ISDA intends to consult on USD LIBOR, CDOR, HIBOR, and SOR in early 2019 and the OSSG strongly supports this. The OSSG co-chairs also encourage ISDA to consult on the key technical details that the ISDA Board Benchmark Committee will need to decide on, before implementation can begin.
    • The necessity of governance and transparency as ISDA makes its final decisions. Importance of this work is such that a careful process of assessment and consideration is essential before the publication of outcomes. It is important to ensure transparency about how the ISDA Board and/or Benchmark Committee would arrive at its decision.

    FSB and member authorities, through the OSSG, are working to implement and monitor recommendations of the 2014 FSB report on reforming major interest rate benchmarks. Since July 2016, ISDA has undertaken work, at the request of the OSSG, to strengthen the robustness of derivatives markets in context of the discontinuation of widely used interest rate benchmarks. The OSSG engages regularly with ISDA and other stakeholders with the goal of enhancing contractual robustness in derivatives products and cash products such as loans, mortgages, and floating rate notes.

     

    Related Links

    Keywords: International, Banking, Securities, Derivative Contracts, LIBOR, IBOR, Interest Rate Benchmarks, Interest Rate Risk, OTC Derivatives, ISDA, 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