The Alternative Reference Rates Committee has recently been active on the transition to SOFR with two Request for Proposals (RFP) releases. Namely, an RFR on Spread adjustments and another on forward looking term SOFR, published on September 2 and 10 respectively. The spread adjustments are essential for all market participants while the term SOFR was at the top of cash market’s wish list.
Transitioning away from IBOR, represents one of the biggest challenges in the financial services industry – but are market participants ready to capture the economic effects of the IBOR transition in their financial statements?
One of the major challenges of IBOR transition is the availability of historical data on alternative risk-free rates (RFRs) required to implement interest rate model changes or re-calibration. With the Secured Overnight Financing Rate (SOFR) only published since April 2018, the available time series do not provide enough observations for risk modelling. Adding to that, derivatives markets linked to...
The revised market risk framework – also known as the Fundamental Review of the Trading Book (‘FRTB’) – not only impacts an institution’s regulatory capital charge calculation for market risk, but also affects operational, governance and business strategies.
The expected 2021 disappearance of LIBOR requires robust fallback language for cash products and derivatives alike. Industry associations have taken initiatives to reform the historic fallback language of securities, with ISDA proactively leading the way on derivatives and national working groups proposing enhancements for cash products. While the derivatives market is expected to be harmonized under...
Could the transition period towards the new alternative Risk-Free Rates (RFRs) be more complex than initially envisaged? The speech given by Edwin Schooling Latter, Director of Markets and Wholesale Policy at the Financial Conduct Authority (FCA), on the 28 January 2019, suggests this might be the case.
With Libor’s cessation date at the end of 2021 looming, global regulators are hastening their IBOR fallback strategies. Yet while market momentum has increased for multiple published RFR indices, among them the GBP SONIA, the EUR €STR, and the USD SOFR, Asian economies, some of which rank among the world’s largest, continue to lag. While significant progress has been made, Asian markets require further...
Financial market participants – at least the largest ones – are actively preparing for the expected discontinuation of the London Inter-Bank Offered Rate (LIBOR) after 2021. Transitioning towards a LIBOR-free world is a challenge that requires the involvement and coordination of the whole industry in order to find appropriate solutions to replace the 35 different LIBOR rates (five currencies at seven...
In this latest review of the ongoing IBOR reforms, we report on recent developments at the different international standard-setters and regulatory bodies and examine some of the preparations for pre-cessation fall-back that the market are undertaking. The financial services sector is no doubt working to strengthen other benchmarks ahead of the transition, however there remains a distinct hesitation...
On March 11 and 12, 2019, Mazars attended the 30th annual conference organized by the Institute of International Bankers (IIB).
Seven years after the first Basel Committee on Banking Supervision’s (BCBS) consultative paper on the Fundamental Review of the Trading Book (FRTB) and three years after the publication of the revised Market Risk Framework, is the 14 January 2019 release of the final Minimum Capital Requirements for market risk the end of this particular regulatory tunnel?
Would the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) start to worry about the ability of their supervised banks and insurers to transition from to sacred London InterBank Offered Rate (LIBOR) to the Sterling Overnight Index Average (SONIA)?
With little more than two years to go, Libor’s cessation date continues to near. The voluntary agreement of panel banks submitting to Libor will conclude at the end of 2021, from which risk-free rates (RFR) are expected to replace Libor and similar indices.
With significant IBOR reform on the horizon, Mazars brought together industry experts, practitioners and regulators to discuss the challenges and opportunities they face. Speakers included the Bank of England Market Division’s Alastair Hughes, EFRAG’s Didier Andries and Mazars’ IBOR lead, Pauline Pelissier.
This survey, launched by Mazars at the end of 2018, aims to reflect the state of the European Financial Services industry readiness for IBOR reform and, to identify the key challenges and potential solutions during the transition period. Although the reform came as no surprise, its extent, rapidity and potential impacts were not anticipated. To add to the complexity, each European jurisdiction progresses...
Paving the way for transition towards an IBOR-free world.
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