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.
Keywords: Europe, EU, Banking, Securities, Benchmarks Regulation, LIBOR, Financial Benchmarks, Benchmark Reforms, Interest Rate Benchmarks, EC, European Council
Previous ArticleECB Updates List of Supervised Entities in EU in October 2020
Next ArticleFED Updates Reporting Form FR Y-9C
APRA announced the standardization of quarterly reporting due dates for authorized deposit-taking institutions.
Bundesbank published a list of "EntryPoints" that are accepted in its reporting system; the list provides taxonomy version and name of the module against each EntryPoint.
The private sector working group of ECB on euro risk-free rates published the recommendations to address events that would trigger fallbacks in the Euro Interbank Offered Rate (EURIBOR)-related contracts, along with the €STR-based EURIBOR fallback rates (rates that could be used if a fallback is triggered).
EBA published the phase 1 of its reporting framework 3.1, with the technical package covering the new reporting requirements for investment firms (under the implementing technical standards on investment firms reporting).
Asia Pacific Australia Banking APS 111 Capital Adequacy Regulatory Capital Basel RBNZ APRA
ESMA published the final guidelines on outsourcing to cloud service providers.
EBA published annual data for two key concepts and indicators in the Deposit Guarantee Schemes (DGS) Directive—available financial means and covered deposits.
OSFI has set out the schedule for release of draft guidance on the management of technology risks by federally regulated financial institutions and private pension plans.
MAS updated rules for new housing loans by banks and finance companies.
HKMA published a statement on the 100% Personal Loan Guarantee Scheme and a guideline on the Green and Sustainable Finance Grant Scheme (GSF Grant Scheme) as announced in the 2021-22 Budget.