FSB全球金融稳定委员会-Supervisory-issues-associated-with-benchmark-transition_-Report-to-the-G20_57页_2mb

Summary of "Supervisory issues associated with benchmark transition"

Core Content

This report, submitted to the G20, addresses the supervisory challenges and risks associated with the transition away from the London Interbank Offered Rate (LIBOR) and the broader use of alternative reference rates (RFRs). It highlights the importance of a coordinated and timely transition to reduce reliance on LIBOR and enhance the resilience of financial systems. The report is based on a questionnaire distributed to financial authorities and standard-setting bodies, with responses from 57 jurisdictions, and includes insights from the International Association of Insurance Supervisors (IAIS).

Main Viewpoints

1. LIBOR Transition is a Global Priority

• LIBOR remains a dominant reference rate in global financial markets, but its discontinuation by the end of 2021 is expected.
• The FSB has emphasized that the transition is critical for financial stability and that the use of RFRs should be encouraged in all interest rate markets.
• The FSB has acknowledged that the pandemic may have delayed some transition efforts, but it has also highlighted the reduced activity in the underlying markets that LIBOR measures, increasing the urgency for a smooth transition.

2. Challenges in Transition

• Exposure Assessment: Many jurisdictions lack comprehensive data on LIBOR exposures, especially for non-FSB countries, making it difficult to assess the full impact of its discontinuation.
• Fallback Language: Only a few jurisdictions have implemented robust fallback language in legacy contracts, which is essential for a smooth transition.
• Operational and Legal Risks: Transition risks include operational, legal, prudential, conduct, hedging, and accounting challenges. There is also concern about the lack of clarity on the readiness of external systems and limited insight into non-regulated clients of FIs.
• Disorderly Transition: Even with low overall exposure, key market participants with significant LIBOR exposure could cause spillover effects, leading to systemic risks.
• Inconsistent Approaches: There are discrepancies in transition timelines and approaches across jurisdictions, complicating cross-border coordination.

3. Supervisory Actions and Initiatives

• Supervisory authorities in LIBOR jurisdictions and some FSB jurisdictions have taken more proactive steps, including:
  • Sending "Dear CEO" letters to promote awareness.
  • Setting internal targets and deadlines for transition.
  • Conducting desktop reviews and on-site examinations.
  • Engaging with national working groups (NWGs) and industry associations.
• Few jurisdictions have set specific roll-off timelines or targets for the industry.
• Some jurisdictions are exploring legislative solutions to address legacy contracts without adequate fallback provisions.

4. Need for International Cooperation

• There is a clear need for cross-border coordination to address inconsistencies in transition timing and legal frameworks.
• International bodies such as the FSB, BCBS, and IOSCO are encouraged to share best practices, challenges, and progress through formal channels.
• The FSB has been tasked with developing standardized metrics and indicators to monitor global transition progress and identify gaps in implementation.

Key Information

Jurisdictional Response Overview

• Total Jurisdictions Surveyed: 96 (57 responded)
• LIBOR Jurisdictions: 5 (EU, Japan, Switzerland, UK, US)
• Non-LIBOR FSB Jurisdictions: 14
• Non-FSB, Non-LIBOR Jurisdictions: 23

Transition Readiness

• FSB Jurisdictions: Most have transition strategies and are more advanced in transition efforts.
• Non-FSB Jurisdictions: Only half have transition strategies, and some are still in the process of assessing risks.
• Non-FIs: Less monitored, with limited awareness and preparedness, especially in smaller institutions.

Fallback Language

• Most jurisdictions have not provided detailed information on fallback language in legacy contracts.
• There is a need for standardized fallback language across products and jurisdictions.

Risks of Discontinuation

• Microprudential Risks: Operational, legal, and conduct risks.
• Macroprudential Risks: Potential volatility and disorderly functioning in LIBOR-referenced markets.
• Unaddressed Exposures: Some jurisdictions identified certain LIBOR exposures that are hard to transition, requiring legislative action.

Recommendations

The report outlines recommendations in three key areas:

1. Identification of Transition Risks and Challenges

• Authorities should issue public statements and "Dear CEO" letters to raise awareness.
• Conduct regular surveys and assessments to identify risk concentrations.
• Request regular updates from FIs on key risks, action plans, and governance structures.

2. Facilitation of LIBOR Transition

• Develop and implement clear transition strategies, including milestones and roadmaps.
• Coordinate with NWGs and industry associations to promote fallback language adoption.
• Dedicate resources and capacity to support transition efforts, including monitoring and supervisory dialogue.
• Conduct further desktop reviews and on-site examinations to assess transition progress and internal/external system readiness.

3. Coordination

• Promote industry-wide coordination through shared best practices and information.
• Encourage collaboration between international bodies to identify common metrics for monitoring transition progress.
• Reduce compliance burdens and avoid duplication of efforts at the domestic level.

Next Steps

• The FSB will design a set of key metrics and indicators to update global LIBOR exposures and transition status by early next year.
• It will also incorporate findings on the impact of the pandemic on benchmark transition into its annual progress report.
• The FSB will continue to monitor the transition and support the implementation of recommendations.

Conclusion

The transition from LIBOR to RFRs is a critical global initiative to ensure financial stability and reduce reliance on vulnerable benchmarks. While progress has been made, significant challenges remain, including the lack of comprehensive data, inconsistent supervisory approaches, and the need for more robust fallback language. International cooperation and coordination are essential to address these issues and ensure a smooth and timely transition.