Featured Product

    ISDA Consults on Final Parameters for Benchmark Fallback Adjustments

    September 18, 2019

    ISDA launched a consultation on the final parameters for the adjustments that will apply to alternative risk-free rates if derivatives fallbacks are triggered. The deadline for responses to the consultation is October 23, 2019. This latest publication follows two earlier consultations, which set out options for the adjustments that will apply to the relevant risk-free rates if fallbacks are triggered for derivatives referencing nine interbank offered rates (IBORs). ISDA has also published a report by The Brattle Group that summarizes the final results of the second of those consultations, which focused on US dollar LIBOR, CDOR from Canada, and HIBOR from Hong Kong.

    This consultation is intended to finalize the methodologies for the adjustments that will be made to derivatives fallbacks in the event certain interbank offered rates (IBORs) are permanently discontinued. These adjustments are necessary because of the differences between the IBORs and the risk-free rates. The adjustments reflect that the IBORs are currently available in multiple tenors, but the risk-free rates identified as fallbacks are overnight rates. The IBORs also incorporate a bank credit risk premium and a variety of other factors, while risk-free rates do not. The Brattle Group report confirms preliminary findings that the overwhelming majority of respondents preferred the "compounded setting in arrears rate" to address the difference in tenors and the "historical mean/median approach" to address the difference in risk premia. 

    Based on the results of this consultation, ISDA will make the relevant adjustments to the 2006 ISDA Definitions to incorporate fallbacks for new IBOR trades. A protocol will also be published to enable market participants to include fallbacks within legacy IBOR contracts if they choose to. Both the amended Definitions and the protocol are expected to be finalized by the end of this year, with implementation in 2020.

     

    Related Links

    Comment Due Date: October 23, 2019

    Keywords: International, Banking, Securities, IBORs, LIBOR, HIBOR, Benchmark Fallbacks, Interest Rate Benchmarks, Risk-Free Rates, ISDA Protocol, ISDA Definitions, ISDA

    Related Articles
    News

    BoE Clarifies Approach to Treatment of Payment Holidays on Form PL

    BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.

    August 11, 2020 WebPage Regulatory News
    News

    BoE Provides Reporting Update on Form AS and Form FV

    BoE updated the known issues document for the statistical reporting Forms AS and FV.

    August 10, 2020 WebPage Regulatory News
    News

    FED Announces Capital Requirements for Large Banks

    FED announced individual capital requirements for 34 large banks and these requirements go into effect on October 01, 2020.

    August 10, 2020 WebPage Regulatory News
    News

    SRB Publishes Guidance on Implementation of Bail-In Tool

    SRB published a set of documents to give operational guidance to banks on implementation of the bail-in tool.

    August 10, 2020 WebPage Regulatory News
    News

    BIS Publishes Update on G20 TechSprint Initiative

    BIS published an update on the G20 TechSprint Initiative, which was launched in April 2020 and aims to highlight the potential for technologies to resolve regulatory compliance (regtech) and supervisory (suptech) challenges.

    August 10, 2020 WebPage Regulatory News
    News

    OSFI Provides Update on Implementation of IFRS 17 in Canada

    OSFI published a letter that provides an update on the milestones for the implementation of the IFRS 17 standard on insurance contracts.

    August 07, 2020 WebPage Regulatory News
    News

    EBA Provides Clarity on Implementation of Guidance on COVID Reporting

    EBA updated the report on the implementation of selected COVID-19 policies.

    August 07, 2020 WebPage Regulatory News
    News

    FSI Note Discusses Challenges Associated with COVID Relief Measures

    The Financial Stability Institute (FSI) of BIS published a brief note that examines the supervisory challenges associated with certain temporary regulatory relief measures introduced by BCBS and prudential authorities in response to the COVID-19 pandemic.

    August 06, 2020 WebPage Regulatory News
    News

    BCBS Consults on Principles for Operational Risk and Resilience

    BCBS is consulting on the principles for operational resilience and the revisions to the principles for sound management of operational risk for banks.

    August 06, 2020 WebPage Regulatory News
    News

    BoE Updates Template and Definitions for Form ER

    BoE updated the reporting template for Form ER as well as the Form ER definitions, which contain guidance on the methodology to be used in calculating annualized interest rates.

    August 05, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5649