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Topic: Benchmarks

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FSB statement on the impact of COVID-19 on global benchmark reform

On 1 July 2020, the Financial Stability Board (FSB) issued a statement concerning the impact of the COVID-19 pandemic on global benchmark transition. The statement notes that it is likely that some firms’ transition plans are likely to be temporarily disrupted or delayed, whilst others are continuing. The FSB maintains its view that financial and … Continue Reading

Supporting Risk-Free Rate transition through the provision of compounded SONIA

On 26 February 2020, the Bank of England (BoE) published a discussion paper ‘Supporting Risk-Free Rate transition through the provisions of compounded SONIA’. In this discussion paper the BoE requested views from sterling market participants in relation to: the BoE’s intention to publish a daily SONIA Compounded Index; and the usefulness of the BoE publishing … Continue Reading

The Prudential Regulation Authority publish statement on on prioritisation in light of Covid-19

The Prudential Regulation Authority (PRA) has published a statement today on the prioritisation of its work in light of the COVID-19 pandemic. The statement sets out further details of the Prudential Regulation Authority’s plans to help firms maintain their safety and soundness and deliver the critical functions they provide to the economy. Accordingly, the statement … Continue Reading

ESMA issues no action letter on the new ESG disclosure requirements under the BMR

On 29 April 2020, the European Securities and Markets Authority (ESMA) issued a no action letter intended to promote coordinated action by Member State national competent authorities (NCAs) regarding the new environmental, social and governance (ESG) disclosure requirements for benchmark administrators under the Benchmarks Regulation (BMR). ESMA has also issued an opinion to the European … Continue Reading

ISDA announces preliminary results of second consultation on pre-cessation fallbacks

On 16 April 2019, ISDA announced the preliminary results of its consultation on the implementation of pre-cessation fallbacks for derivatives referencing LIBOR. The consultation, commenced in February 2020, invited feedback from market participants on whether a pre-cessation trigger should be included in ISDA standard documents in addition to the permanent cessation fallbacks that ISDA is … Continue Reading

International Accounting Standards Board consults on interest rate benchmark reform changes

The International Accounting Standards Board  (IASB) has announced a consultation on proposed amendments to the International Financial Reporting Standards (IFRS) Standards to assist companies in providing useful information to investors about the effects of interest rate benchmark reform on financial statements. The IASB has split its work on interest rate benchmark reform on financial reporting … Continue Reading

ESMA promotes coordinated action regarding benchmarks external audit requirements

On 9 April 2020, the European Securities and Markets Authority (ESMA) issued a public statement intended to promote coordinated action by Member State national competent authorities (NCAs) regarding the timeliness of fulfilling external audit requirements for interest rate benchmark administrators and contributors to interest rate benchmarks. ESMA states that, in coordination with NCAs, it expects … Continue Reading

European Commission sets out sustainability criteria for benchmarks

On Wednesday, 8 April 2020, the European Commission published three draft delegated regulations setting out sustainability criteria for benchmarks provided in accordance with the Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (BMR). These measures follow amendments to the BMR introduced … Continue Reading

EBA updates impact of the Basel III reforms on EU banks’ capital and compliance with liquidity measures

On 8 April 2020, the European Banking Authority (EBA) published two reports measuring the impact of implementing the final Basel III reforms and monitoring the current implementation of liquidity measures in the EU. Overall, the EBA estimates that the Basel III reforms, once fully implemented in 2028 after the additional delay of one year agreed … Continue Reading

Japanese Financial Services Agency and the Bank of Japan – Summary of Survey Results on the Use of LIBOR and Main Actions Needed

The Japanese Financial Services Agency (JFSA) and the Bank of Japan have published the results of a survey on the use of LIBOR by financial institutions (including banks, securities companies insurance companies and others), their LIBOR exposures and LIBOR transition progress. The survey enables supervisory authorities to quantify the number of contracts that reference LIBOR … Continue Reading

Bank of England consultation on credit adjustment spread methodologies for fallbacks in cash products referencing GBP LIBOR – Summary of responses

The Working Group on Sterling Risk-Free Reference Rates (Working Group) has published a consultation paper for the sterling cash market (including loans, bonds, and securitisations) considering four methodologies that could be used to calculate the credit adjustment spread for fallbacks from GBP LIBOR to SONIA in cash products maturing beyond the end of 2021. The … Continue Reading

European Commission publishes roadmap for European Benchmarks Regulation review

On 18 March 2020 the European Commission published a roadmap for the review of Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (“European Benchmark Regulation” or BMR). The roadmap – formal title being “inception impact assessment” – sets out the Commission’s … Continue Reading

Working Group on Euro Risk-free Rates’ factsheets on EONIA to €STR transition and EURIBOR fallbacks

The European Central Banks’s working group on euro risk-free rates has published a factsheet on EONIA to €STR transition and a factsheet on understanding EURIBOR fallbacks. The EONIA to €STR transition factsheet provides background information on why the transition is happening, a timeline and some of the key issues arising from the transition, which include: … Continue Reading

LIBOR Transition – Bank of England announces intention to publish a daily SONIA Compounded Index

Introduction On 26 February 2020, the Bank of England published a discussion paper Supporting Risk-Free Rate transition through the provisions of compounded SONIA, February 2020 (the Discussion Paper) which requested views from sterling market participants in relation to: the Bank of England’s intention to publish a daily SONIA Compounded Index; and the usefulness of the … Continue Reading

ECB working group on euro risk-free rates seeks feedback on Swaptions impacted by transition from EONIA to the €STR

On 13 March 2020, the European Central Bank (ECB) working group on euro risk-free rates launched a public consultation on whether to issue recommendations to address specific issues for swaption products as a result of the proposed transition from EONIA to the euro short-term rate (€STR). The central counterparty (CCP) discounting switch from EONIA to … Continue Reading

Loans Enablers Task Force – path to discontinuation of new GBP LIBOR lending by end-Q3 2020

On 10 March 2020, the Loans Enablers Task Force (the Task Force) of the Working Group on Sterling Risk-Free Reference Rates (the RFR Working Group) published an indicative roadmap outlining a path for the discontinuation of new GBP LIBOR-based cash lending by end-Q3 2020. This roadmap is intended to act as a guide for lenders, … Continue Reading

BoE and FCA letter to trade associations – how discontinuation of LIBOR may affect your members and stakeholders

On 9 March 2020, the Bank of England (BoE) and the Financial Conduct Authority (FCA) published a letter that they had sent to trade associations regarding how the discontinuation of LIBOR might affect their members and stakeholders. The letter explains why LIBOR is ending, how this will affect trade associations and their members, the alternatives … Continue Reading

ESMA consults on new BMR regulatory technical standards

On 9 March 2020, the European Securities and Markets Authority (ESMA) launched a public consultation on new draft Regulatory Technical Standards (RTS) under Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (“European Benchmark Regulation” or BMR). This new draft RTS follows … Continue Reading

European Benchmarks Regulation – an overview

Introduction The European Benchmarks Regulation (BMR) introduces a regime for benchmark administrators that aims to ensure the accuracy and integrity of benchmarks. The legislation was adopted in 2016 and has been in force since 2018, subject to certain transitional provisions applicable to both European and third-country benchmark administrators. In particular, European benchmark administrators had to … Continue Reading

Basel Committee newsletter – benchmark rate reforms

On 27 February 2020,  the Basel Committee on Banking Supervision published a newsletter concerning the benchmark rate reforms. Key points in the newsletter include: as the London inter-bank offered rate (LIBOR) is not expected to exist past year-end 2021, market participants should consider carefully the economic, legal and reputational risks associated with continuing to write … Continue Reading

FCA Dear CEO letter: Asset management firms – prepare now for the end of LIBOR

On 27 February 2020, the FCA published a Dear CEO letter to asset management firms concerning their preparations for the end of LIBOR. Key points in the Dear CEO letter include: asset managers should assume that LIBOR will cease after December 2021. Should an asset manager offer products or services that are exposed to or … Continue Reading

Asia Pacific market participants respond to APLMA’s IBOR Transition survey

Last September, the LMA published Exposure Drafts of Compounded RFR Facilities Agreements by reference to SOFR and SONIA (being the chosen replacement near risk free rates for USD markets and LIBOR in the Sterling respectively), along with a commentary inviting market participants to consider various structuring issues (see earlier blog). The APLMA recently sought feedback from … Continue Reading

LMA invites market participants to comment on outstanding requirements to be satisfied before recommended forms of compounded risk free rate facilities agreements can be finalised

In September 2019, the Loan Market Association published exposure drafts of Compounded Risk Free Rate Facility Agreements by reference to SONIA and SOFR, being the chosen replacement near risk free rates for LIBOR in the Sterling and USD markets respectively together with commentary inviting market participants to consider various structuring issues which need to be … Continue Reading
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