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Topic: Benchmarks

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FCA Dear CEO letter to benchmark administrators on supervision strategy

On 28 January 2020, the FCA published a Dear CEO letter (dated 24 January 2020) setting out the regulator’s view of the potential harm as well as the underlying drivers that benchmark administrators could pose to their customers and the markets in which they operate. The FCA sees three main ways in which benchmark administrators … Continue Reading

FCA and IBA response to ISDA letter providing clarity of implications of non-representative LIBOR

On 24 January 2020, the FCA published a letter from Richard Fox, FCA Head of Markets Policy, to the International Swaps and Derivatives Association (ISDA) (dated 20 January 2020) explaining why market participants should not assume that any period of non-representative LIBOR based on reduced panel bank submissions would last for more than a short … Continue Reading

Working Group on Sterling Risk-Free Reference Rates: progress on the transition of LIBOR – referencing legacy bonds to SONIA by way of consent solicitation

On 16 January 2020, the Working Group on Sterling Risk-Free Reference Rates (RFRWG) published a statement entitled “Progress on the transition of LIBOR – referencing legacy bonds to SONIA by way of consent solicitation“.  In the statement, the RFRWG welcomes the consent solicitations that have already taken place or are underway to transition legacy bond … Continue Reading

Working Group on Sterling Risk-Free Reference Rates: The use cases of benchmark rates: compounded in arrears, term rate and further alternatives

On 16 January 2020, the Working Group on Sterling Risk-Free Reference Rates (RFRWG) published a paper on The use cases of benchmark rates: compounded in arrears, term rate and further alternatives. The paper is addressed to financial firms and non-financial end users, such as corporates, small to medium size enterprises, retail consumers and others, who … Continue Reading

Progress on the transition of LIBOR – referencing legacy bonds to SONIA by way of consent solicitation

On 16 January 2020, the Working Group on Sterling Risk-Free Reference Rates (RFRWG) published a statement entitled Progress on the transition of LIBOR – referencing legacy bonds to SONIA by way of consent solicitation.  The statement is intended to encourage participants in the sterling bond market (including sterling floating rate notes, covered bonds and securitisations) … Continue Reading

LIBOR transition: the use of SONIA compounded in arrears in project finance transactions

In its paper of 16 January 2020 on The use cases of benchmark rates: compounded in arrears, term rate and further alternatives, the Bank of England’s Working Group on Sterling Risk-Free Reference Rates (RFRWG) identified, among other things, that it had considered whether SONIA compounded in arrears would be appropriate to replace LIBOR as the … Continue Reading

Next steps for LIBOR transition in 2020: the time to act is now

On 16 January 2020, the Bank of England (BoE), Financial Conduct Authority (FCA) and the Working Group on Sterling Risk-Free Reference Rates (RFRWG) published the following documents outlining priorities and milestones for 2020 on LIBOR transition: RFRWG’2 2020 priorities and milestones. The top five RFRWG priorities are: (i) cease issuance of GBP LIBOR-based cash products … Continue Reading

Working Group on Sterling Risk-Free Reference Rates market consultation published on credit adjustment spread methodologies

The Working Group on Sterling Risk-Free Reference Rates has published a market consultation on credit adjustment spread methodologies for fallbacks in cash products referencing GBP LIBOR to assist cash markets, including the syndicated lending market, consider methodologies for credit adjustment spreads for fallbacks from LIBOR to a SONIA-derived rate that operate from a trigger date … Continue Reading

FMLC response to Commission consultation on BMR review

On 31 December 2019, the Financial Markets Law Committee (FMLC) published its response to the European Commission’s consultation on the review of the Benchmark Regulation (BMR). The FMLC welcomes the Commission’s review of the BMR, which was published in October 2019, noting that the BMR has had a significant impact on the financial markets. For … Continue Reading

FSB report on the need to reduce risks to financial stability from LIBOR transition

On 18 December 2019, the Financial Stability Board (FSB) published its annual progress report on the implementation of its 2014 recommendations to reform major interest rate benchmarks. The report emphasises that the continued reliance of global financial markets on LIBOR poses risks to financial stability and the FSB calls for significant and sustained efforts by … Continue Reading

PRA letter – the prudential regulatory framework and LIBOR transition

On 18 December 2019, the PRA published a letter from Sam Woods, PRA CEO and Bank of England Deputy Governor, Prudential Regulation, to Tushar Morzaria, Chair of the Working Group on Sterling Risk-Free Rates (the Working Group). The PRA’s letter is in response to a communication from the Working Group earlier this year regarding regulatory … Continue Reading

ESMA provides information on pending applications for benchmark administrators

On 13 December 2019, the European Securities and Markets Authority (ESMA) published a table that includes information shared by Member State national competent authorities (NCAs) in relation to the applications for authorisation and registration by EU-based administrators under Article 51(1) of the Benchmark Regulation (BMR) for which, as of 1 January 2020, the decision by … Continue Reading

ESMA updates its Q&As on the BMR

On 11 December 2019, the European Securities and Markets Authority (ESMA) updated its Q&As on the Benchmarks Regulation. The update provides clarification on the transitional provisions applicable to third country benchmarks following the publication in the Official Journal of the EU of Regulation (EU) 2019/2089 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and … Continue Reading

Disclosure Regulation and Low Carbon Benchmarks Regulation published in OJ

On 9 December 2019, there was published in the Official Journal of the European Union (OJ): Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (the Disclosure Regulation); and Regulation (EU) 2019/2089 of the European Parliament and of the Council of … Continue Reading

ISDA responds to FSB letter on pre-cessation triggers for derivatives fallback

On 4 December 2019, the International Swaps and Derivatives Association (ISDA) published a letter to the co-chairs of the Financial Stability Board (FSB) Official Sector Steering Group (OSSG) in response to a November 2019 letter from the OSSG co-chairs (see previous blog here). In the letter, the ISDA reaffirms its commitment to implementing robust fallbacks … Continue Reading

ESMA updates Q&As on Benchmarks Regulation

On 4 December 2019, the European Securities and Markets Authority (ESMA) published an updated version of its Q&As on the Benchmarks Regulation (BMR). The updated Q&As amend question and answer 7.6 on whether the annual review of the International Organization of Securities principles for Oil Pricing Reporting Agencies is sufficient for the purpose of paragraph … Continue Reading

FSB letter to ISDA on the addition of a pre-cessation trigger

On 19 November 2019, the Financial Stability Board (FSB) published a letter (dated 15 November 2019) from the co-chairs of its Official Sector Steering Group (OSSG) of regulators and central banks to the International Swaps and Derivatives Association (ISDA). In the letter the co-chairs of the OSSG thank the ISDA for its work on more … Continue Reading

Report by the ECB working group on euro risk-free rates on fallback arrangements for €STR

On 12 November 2019, the working group on euro risk-free rates published a report on fallback arrangements for the euro short-term rate (€STR). The report provides supervised entities with guidance on potential ways to comply with Article 28.2 of the EU Benchmarks Regulation (BMR) when using the euro short-term rate (€STR), as the euro risk-free … Continue Reading

ECB working group recommendations for fallback provisions in contracts referencing LIBOR

On 6 November 2019, the European Central Banks’s (ECB) working group on euro risk-free rates issued high level recommendations for fallback provisions in contracts referencing EURIBOR. The working group notes that historically, contractual fallback provisions generally only contemplate the temporary unavailability of EURIBOR and do not address its permanent cessation and/or any differences between EURIBOR … Continue Reading

ESMA’s role under BMR and interest rate benchmark reform

On 29 October 2019, the European Securities and Markets Authority (ESMA) published a speech by its chair, Steven Maijoor, focusing on the European Supervisory Authority’s (ESA) role under the Benchmarks Regulation. In his speech Mr Maijoor focuses on the implementation of the third country regimes, the advice ESMA provided to national competent authorities and its … Continue Reading

LIBOR transition to Alternative Risk Free Rates: drafting new loan agreements, and amending legacy LIBOR loan agreements

The Loan Market Association has over the last few weeks published exposure drafts of forms of loan agreement referencing risk free rates for new transactions, and a form of agreement with lenders as a first step to agreeing to amend legacy LIBOR loan agreements for alternative reference rates. On the 25th October 2019 the LMA … Continue Reading

FMLC paper on issues of legal uncertainty regarding onshored Benchmark Regulation

On 23 October 2019, the Financial Markets Law Committee (FMLC) published a paper on issues of legal uncertainty in respect of the retained EU law version of the Benchmarks Regulation. In the paper, the FMLC highlights the challenges of providing a new benchmark into the EU once the UK becomes a third country post-Brexit and … Continue Reading
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