Featured Product

    FSB Sets Out Roadmap for Transition to Alternative Reference Rates

    October 16, 2020

    FSB published a global transition roadmap for London Inter-bank Offered Rate (LIBOR). The roadmap sets out a timetable of actions for financial and non-financial sector firms to take to ensure a smooth LIBOR transition by the end of 2021. This roadmap is intended to inform those with exposure to LIBOR benchmarks of some of the steps they should be taking now and over the remaining period to the end of 2021 to successfully mitigate these risks. These prudent steps are intended to supplement the existing timelines or milestones from industry working groups and regulators.

    The LIBOR benchmarks are not guaranteed to continue to be available after the end of 2021 and, therefore, preparations should be underway to reduce reliance on these rates well ahead of that point. Use of LIBOR in the five LIBOR currencies (USD, GBP, EUR, JPY, and CHF) is widespread internationally. As such, transition away from LIBOR by the end of 2021 requires significant commitment and sustained effort from both financial and non-financial institutions across many LIBOR and non-LIBOR jurisdictions. The roadmap sets out clear actions, including the following, needed from financial firms and their clients to ensure a smooth LIBOR transition:

    • Firms should have already identified and assessed all existing LIBOR exposures and agreed on a project plan to transition in advance of the end of 2021. The firms that currently provide clients with products that reference LIBOR should have begun to implement a plan for communicating with end-users of LIBOR referencing products maturing beyond the end of 2021 to ensure that they are aware of the transition and the steps being taken to support moving those products to alternative reference rates.
    • By the effective date of the ISDA Fallbacks Protocol, FSB strongly encourages firms to have adhered to the Protocol subject to individual firms’ usual governance procedures and negotiations with counterparties, as necessary. Where the protocol is not used, other appropriate arrangements will need to be considered to mitigate risks. Providers of cleared and exchange-traded products linked to LIBOR should also ensure that these products incorporate equivalent fallback provisions as appropriate.
    • By the end of 2020, firms should be in a position to offer non-LIBOR-linked loans to their customers. This could be done either in terms of giving borrowers a choice in terms of the reference rate underlying their loans, or by working with borrowers to include language for conversion by the end of 2021 for any new, or refinanced, LIBOR-referencing loans.
    • By mid-2021, firms should have established formalized plans to amend legacy contracts and should have implemented the necessary system and process changes to enable transition to robust alternative reference rates. 
    • By the end of 2021, firms should be prepared for LIBOR to cease. All new business should either be conducted in alternative reference rates or be capable of switching at limited notice. For any legacy contracts for which it has not been possible to make these amendments, the implications of cessation or lack of representativeness should have been considered and discussed between the parties and steps taken to prepare for this outcome, as needed. All business critical systems and processes should either be conducted without reliance on LIBOR or be capable of being changed to run on this basis at limited notice.

     

    Related Links

    Keywords: International, Banking, Securities, LIBOR, Fallback Protocol, Legacy Contracts, Roadmap, Benchmark Reforms, FSB

    Related Articles
    News

    APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness

    APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).

    December 02, 2021 WebPage Regulatory News
    News

    EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance

    The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).

    December 01, 2021 WebPage Regulatory News
    News

    FSB Sets Out Good Practices for Crisis Management Groups

    The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.

    November 30, 2021 WebPage Regulatory News
    News

    APRA Penalizes Heritage Bank for Incorrect Reporting of Capital

    The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Releases Annual Report 2021-2022

    The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.

    November 29, 2021 WebPage Regulatory News
    News

    OSFI Updates Timeline for Implementation of Certain Basel Rules

    Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.

    November 29, 2021 WebPage Regulatory News
    News

    EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR

    EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.

    November 29, 2021 WebPage Regulatory News
    News

    FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR

    The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.

    November 29, 2021 WebPage Regulatory News
    News

    APRA Finalizes Capital Adequacy Standards for Banks

    The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.

    November 29, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.

    November 29, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7751