Featured Product

    European Council Adopts Position on Amendments to Benchmark Regulation

    October 07, 2020

    EU ambassadors of member states agreed om the mandate of European Council for negotiations with the European Parliament on proposed amendments to the Benchmark Regulation (2016/1011). In July, EC had proposed to amend EU rules on financial benchmarks against the background of the transition to new reference rates on major capital markets, particularly in the backdrop of an expected phasing out of LIBOR by the end of 2021. European Council takes the view that the current rules that allow supervised entities in EU to make use of third-country benchmarks should continue to apply until the end of 2025 and not 2021, thus allowing smooth transition to a list of exempted benchmarks to be drawn up by EC.

    In its negotiating mandate, European Council takes the view that the powers of EC should apply to a broader range of contracts and financial instruments that reference a benchmark than is proposed by EC. The expanded scope includes both financial contracts and instruments that are subject to the law of an EU member state and certain third-country law contracts. European Council also provides for the possible statutory replacement of benchmarks that do have a fallback provision for the cessation of a benchmark, but where the application of that clause would challenge financial stability and disrupt the market in a member state. On the basis of this negotiating mandate, the presidency will start negotiations with the European Parliament as soon as the Parliament has adopted its position.

    At present, the Benchmark Regulation does not address the possibility of cessation of a critical benchmark. The aim of these amendments is to create a framework that would allow a statutory replacement rate to be in place by the time a systemically important benchmark such as LIBOR is no longer in use. This will reduce legal uncertainty regarding legacy contracts and avoid risks to financial stability. The new rules give EC the power to designate a statutory replacement rate to take the place of all references to a benchmark whose cessation would result in significant disruption to the functioning of financial markets in EU. When designating a statutory replacement rate, EC would have to take into account the recommendations of the dedicated working groups on replacement rates. In addition, the new rules ensure that EU benchmark users can, for the time being, continue to rely on third-country spot exchange rates to hedge the exchange-rate risk.

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, Benchmarks Regulation, LIBOR, Financial Benchmarks, Benchmark Reforms, Interest Rate Benchmarks, EC, European Council

    Related Articles
    News

    OSFI Issues Results of Pilot on Climate Risk Scenario Analysis

    The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.

    January 20, 2022 WebPage Regulatory News
    News

    EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR

    The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).

    January 20, 2022 WebPage Regulatory News
    News

    ECB Issues Opinions on Green Bonds Standard and CRR Proposals

    The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.

    January 19, 2022 WebPage Regulatory News
    News

    ESRB Explores Policy Response to Risks Arising from Digitalization

    The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.

    January 18, 2022 WebPage Regulatory News
    News

    HKMA Consults on FIRO Code, Revises Policy on Foreign Exchange Risk

    The Hong Kong Monetary Authority (HKMA) is consulting on the draft Financial Institutions (Resolution) Ordinance (Cap. 628), or FIRO, Code of Practice chapter on liquidity and funding in resolution, until March 14, 2022.

    January 18, 2022 WebPage Regulatory News
    News

    FI Publishes Multiple Regulatory and Reporting Updates

    The Swedish Financial Supervisory Authority (FI) announced that the capital adequacy reporting as at December 31, 2021 must be done by February 11, 2022.

    January 17, 2022 WebPage Regulatory News
    News

    EU Authorities Address COVID-19 Reporting, MCD, and PSD2 Issues

    The European Banking Authority (EBA) announced that the guidelines on the reporting and disclosure of exposures subject to measures COVID-relief measures shall continue to apply until further notice.

    January 17, 2022 WebPage Regulatory News
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7881