Featured Product

    BoE Issues Statement on Adoption of Risk-Free Rates in Sterling Market

    May 15, 2019

    BoE released a statement on behalf of the Working Group on Sterling Risk-Free Reference Rates. The statement provides an update on progress in the adoption of SONIA in sterling markets, including work underway to develop a term benchmark based on that risk-free rate. The statement highlights that, in the derivative markets, the share of swaps traded using SONIA is already broadly equivalent to that linked to LIBOR.

    It is now just over a year since the BoE implemented reforms to the SONIA interest rate benchmark, improving the sustainability and representativeness of the chosen alternative risk-free reference rate in UK. Following that change, sterling-denominated financial markets have begun to shift decisively away from LIBOR and toward SONIA. In the derivative markets, the share of swaps traded using SONIA is already broadly equivalent to that linked to LIBOR. Liquidity and open interest in SONIA futures is also growing steadily. SONIA is also being adopted in cash markets. SONIA-linked Floating Rate Notes (FRNs) have rapidly become the market norm and LIBOR-linked sterling FRN issuance beyond 2021 has all but ceased. Recent weeks also saw the issuance of the first distributed SONIA-linked Residential Mortgage-Backed Security (RMBS). Looking ahead, the next goal is to reduce reliance on LIBOR in other sterling cash markets, including loans.

    Given the rapid development of liquidity in markets referencing overnight SONIA, the Working Group anticipates that corporate borrowers will increasingly prefer contracts that reference compounded overnight SONIA. For those already able and willing to do so, the Working Group encourages providers and users of such products to press ahead with their transition efforts, thus reducing the risk of disorderly adjustment closer to end-2021 and helping to develop liquidity in SONIA-referencing markets even further. The Working Group also supports the work underway to develop a term benchmark based on the sterling risk-free rate, known as a Term SONIA Reference Rate (TSRR). 

    In December 2018, the Working Group had published a statement inviting interested benchmark administrators to consider the summary of responses to the TSRR consultation and to share any views on the development of such benchmarks. Three administrators (FTSE Russell, ICE Benchmark Administration, and Refinitiv) have confirmed that they are working on the development of a TSRR, with each delivering a short factual presentation to the Working Group at a meeting on May 14, 2019. Over the remainder of 2019, the Working Group expects that administrators will work to establish if a robust TSSR, compliant with international standards, can be produced on a timetable consistent with the broader transition work. The Working Group welcomes these developments and has established a new Task Force to ensure that this work remains on track. 

     

    Related Links

    Related Articles
    News

    EU Amends IFRS 9 Rule, Changes Concern Interest Rate Benchmark Reforms

    EU published Regulation 2020/34 regarding the International Accounting Standard (IAS) 39 and International Financial Reporting Standards (IFRS) 7 and 9.

    January 16, 2020 WebPage Regulatory News
    News

    FDIC and OCC Issue Statement on Heightened Cyber Security Risk

    In response to the heightened cyber-security risk facing the financial services industry and other critical business sectors, FDIC and OCC issued an interagency statement on heightened cyber-security risk.

    January 16, 2020 WebPage Regulatory News
    News

    BoE and FCA Outline Next Steps for LIBOR Transition in 2020

    BoE, FCA, and the Working Group on Sterling Risk-Free Reference Rates (RFRWG) have published a set of documents that outline the LIBOR transition priorities and milestones for 2020.

    January 16, 2020 WebPage Regulatory News
    News

    BCRA Updates Regulation on Capital Requirements and Information Regime

    BCRA updated the rules on minimum capital requirements for financial entities and on certain aspects of the information transparency regime for quarterly and annual supervision.

    January 16, 2020 WebPage Regulatory News
    News

    BIS to Expand Central Bank Membership

    BIS is to expand its central bank membership base and to increase collaboration in its work as a forum for international cooperation and as a hub for central banks and other financial authorities.

    January 14, 2020 WebPage Regulatory News
    News

    EIOPA Issues Technical Specifications for Market and Credit Risk Study

    EIOPA published the technical specifications, including instructions, for the market and credit risk modeling comparative study for year-end 2019.

    January 13, 2020 WebPage Regulatory News
    News

    FED Publishes FAQs on Tailoring Rules for Banks

    FED released a letter announcing the publication of an initial set of frequently asked questions (FAQs) in response to questions from institutions.

    January 13, 2020 WebPage Regulatory News
    News

    IA of Hong Kong Publishes Stress Testing Scenarios in Relation to ORSA

    IA of Hong Kong published the prescribed scenarios for stress and scenario testing to be used by the authorized insurers conducting general insurance business.

    January 13, 2020 WebPage Regulatory News
    News

    FDIC Letter on Submission of Call Reports by End of January 2020

    FDIC, in a letter to financial institutions, announced that the Consolidated Reports of Condition and Income (Call Reports) for the December 31, 2019 report date must be submitted to the Central Data Repository of the relevant US agencies by January 30, 2020.

    January 13, 2020 WebPage Regulatory News
    News

    EBA Consults on Calculation of Own Funds Requirements for Market Risk

    EBA is consulting on the draft regulatory technical standards for calculation of the own funds requirements for market risk, under the standardized and internal model approaches of the Fundamental Review of the Trading Book (FRTB) framework.

    January 13, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4489