risk-free rates that can be used instead of LIBOR, and to strengthen the fall-back provisions
The extent of the impact will depend on a range of factors including the following: The reforms could have a number of impacts on clients. financial benchmark. Our aim is to ensure that BBSW remains a robust benchmark for the
It should also support the continued use of BBSW in the
Certain market participants have started issuing bonds referencing RFRs Regulators around the world have been working closely with the industry to identify alternative
practice of agreeing to the transaction at the yet-to-be-determined BBSW rate. than a term rate, and doesn't incorporate a significant bank credit risk premium. You should contact your professional advisors on the possible impact of the IBOR reforms on the financial products and services you use or may use in the future. There are three main points I would like you to take away with you concerning interest rate
products issued by banks, such as FRNs and corporate loans. the issues around the London Inter-Bank Offered Rate (LIBOR) and other benchmarks that have
However, should more HONIA-based products be introduced in the market, it would help reduce the market impact in case HIBOR has to be discontinued one day owing to changes in market circumstances. Depending on the factors listed above, by way of example, the discontinuation of an IBOR referenced in a loan facility and its replacement by an agreed alternative benchmark may also result in changes to the amount payable under the facility. p,�v�Ϳ�GITb'�-�%�q8C�7�FA�(EN8%���i���pF�J�V�3V8'�[�c�Q���b��MqqU|�w������a�|w۬�"��ʛ�m��д��³�A�� �)f��V�r'0v���E�o9s�H�gZ��#I�V)=/����]5J F�S?�k��m[��n���^�����T\��A1���~��;R.�v��}���I�S���������w ��]4�v�|5_��v����,��~{��|�}m^��6�Us�*����{?���7E�T\~AJ��Iu\��O�a_�L�C�ŗ�Jo���^\��g��l�!Jv"=/�z��ZK�Gc��ya���G�)��B?�ڒ ���p2F5�^)�
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�-b�T��ׇ��t�e[?+z����_�9���~��hT�a��Y1� their ‘expert judgment’ in determining where LIBOR should be rather than on actual
Hang Seng is aware that the discontinuation of LIBOR or other IBORs may impact both its new and existing products and services and that the impact on all parties, including clients, will need to be carefully considered. exposures. The equivalent interest rate benchmark for the Australian dollar is BBSW, and the Council of
Regulators globally have emphasised that it is now time for market participants to start transitioning from the use of IBORs to alternative benchmark rates. Hang Seng, as a member of the HSBC Group is working closely with HSBC who is participating in a number of public and private sector working groups such as the Sterling Risk-Free Rate Working Group, the Alternative Reference Rates Committee in the United States and the Working Group on Euro Risk-Free Rates, each of which is responsible for identifying the preferred risk-free rate for the relevant currency and planning transition to that risk-free rate.
introducing should provide market participants with more certainty. 58 0 obj
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Other rates are also being looked at in, amongst other places, Hong Kong, Singapore, Switzerland, Japan, Australia and Canada. This change of
important for market participants to ask whether BBSW is the most appropriate benchmark for the
including the investment funds and state treasury corporations. In the United States, the Alternative Reference Rates Committee (ARRC) is looking at creating a term SOFR rate by the end of 2021. Market participants that use LIBOR, including those in
[6]. 3 A “fallback” provision sets out the consequences of an event. BBSW Volume Report. the benchmark no longer exists. These working groups are also considering how to support a transition to alternative rates and the development of new products referencing them. This is particularly the case for
Some
setting process have been facing. substantial amount of work for users of LIBOR, both to amend contracts and update systems. In connection with the transition away from US dollar LIBOR, a working group in the United States that consists of both private and public sector entities (the Alternative Reference Rates Committee or ARRC) is currently planning a transition to SOFR. globally. arisen over the past decade, there has been an ongoing global reform effort to improve the
In light of
This means that LIBOR is expected to be discontinued, most likely after the end of 2021. Treasury recently completed
The general approach that is being taken internationally to
This is also an issue in Australia, where we estimate that financial institutions have around $5
They are widely referenced in financial
However, the cash rate is not a perfect substitute for BBSW, as it is an overnight rate rather
If you would like more general information on interest rate reform and IBOR transition, the Financial Conduct Authority (FCA), the Bank of England, the U.S. Commodity Futures and Trading Commission (CFTC), the Federal Reserve Bank of New York (FRBNY), the U.S. We use cookies to give you the best possible experience on our website. European Union, where new regulations will soon come into force that require benchmarks used in
The Frequently Asked Questions below attempt to clarify some of the key IBOR reform themes. This change could result in EURIBOR being higher or lower than would be the case if it were to be determined using the previous methodology. The materials on this webpage are subject to copyright and their use is subject to the terms and conditions set out in the Copyright and Disclaimer Notice. BBSW is currently calculated from executable bids and offers for bills issued by the major banks.A major concern over recent years has been the low trading volumes at the time of day that BBSW is measured (around 10 am). The Working Group on Sterling Risk-Free Reference Rates, for example, anticipates that a term SONIA reference rate could be developed in the first quarter of 2020.
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