Featured Product

    ECB Publishes Report on Fallback Arrangements for Users of €STR

    November 12, 2019

    ECB published a report, from the private-sector working group on euro risk-free rates, that recommends possible fallback arrangements for users of €STR products. The working group has assessed different fallback arrangements for products referencing €STR, the new overnight euro risk-free rate. Based on the assessment, the working group recommends market participants to consider existing methodological review procedures of €STR and the policies and procedures in case of the possible cessation of the €STR, along with fallback provisions provided in the EONIA to €STR Legal Action Plan, as sufficient contingency to serve as fallback measures for €STR. The working group is of the opinion that this combination will provide sufficient contingency as fallback measures for the €STR.

    The report points out that the private-sector working group on euro risk-free rates considered the following two options for fallback arrangement for €STR:

    • Select one of the alternative rates that were considered in the consultation before the euro risk-free rate was selected.
    • Take into account the methodology review that ECB will conduct on a regular basis to ensure that the underlying interest of the €STR is adequately measured and captured. Also take into account the policies and procedures to be followed in case of the possible cessation of the €STR, in line with the ECB legal framework, combined with the use of contractual fallbacks for products that reference the €STR that are consistent with the relevant parts of those already recommended with respect to EONIA.

    The report is intended to provide the supervised entities with guidance on potential ways to comply with Article 28.2 of the EU Benchmarks Regulation when using the euro short-term rate (€STR) as the euro risk-free rate in contracts. Article 28.2 of the Benchmarks Regulation requires supervised entities to have robust written plans setting out the actions they would take in the event that a benchmark materially changes or ceases to be provided. Those plans should be reflected in the contractual relationship with clients. Where feasible and appropriate, the plans should include the nomination of one or several alternative benchmarks that could be referenced to substitute the benchmarks no longer provided, indicating why such benchmarks would be suitable alternatives. 

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, €STR, Risk-free Rates, Benchmarks Regulation, Fallback Provisions, Interest Rate Benchmarks, ECB

    Related Articles
    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
    News

    EC Mandates ESAs to Propose Amendments to SFDR Technical Standards

    The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.

    May 11, 2022 WebPage Regulatory News
    News

    EBA Examines Supervisory Practices, Issues Deposits Reporting Template

    The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),

    May 11, 2022 WebPage Regulatory News
    News

    US Agency Publications Address Basel, Reporting, and CECL Developments

    The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances

    May 09, 2022 WebPage Regulatory News
    News

    SEC Extends Comment Period on Climate Risk Disclosures

    The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.

    May 09, 2022 WebPage Regulatory News
    News

    APRA Reduces Committed Liquidity Facility, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.

    May 09, 2022 WebPage Regulatory News
    News

    CMF Consults on Basel Rules, Presents Roadmap to Address Climate Risks

    The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.

    May 06, 2022 WebPage Regulatory News
    News

    PRA Issues Statement on NPEs and Policy on Trading Activity Wind-Down

    The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.

    May 06, 2022 WebPage Regulatory News
    News

    EBA Updates Standards for 2023 Benchmarking of Internal Approaches

    The European Banking Authority (EBA) updated the implementing technical standards that specify the data collection for the 2023 supervisory benchmarking exercise in relation to the internal approaches used in market risk, credit risk, and IFRS 9 accounting.

    May 06, 2022 WebPage Regulatory News
    News

    EIOPA Responds to Stakeholder Views on Blockchain in Insurance

    The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.

    May 06, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8172