Hong Kong Monetary Authority announces LIBOR transition milestones and provides guidance on prudential issues

The Hong Kong Monetary Authority (HKMA) has issued a circular to announce the key milestones that authorised institutions (AIs) should endeavour to achieve in the transition from LIBOR to alternative reference rates (ARRs).

This follows a statement by the Financial Stability Board (FSB) on 1 July 2020 in which it maintained its long-held view that “firms across all jurisdictions should continue their efforts in making wider use of risk-free rates in order to reduce reliance on IBORs where appropriate and in particular to remove remaining dependencies on LIBOR by the end of 2021”, notwithstanding the Covid-19 outbreak.

As advised by the HKMA, AIs should implement a detailed work plan (by product and by business line) to achieve the milestones. If they anticipate difficulties in achieving the milestones, they should reach out to the HKMA as soon as possible.

This e-bulletin provides an overview of the milestones, as well as recent developments in Hong Kong and internationally. Among other things, the HKMA issued a circular on 23 July 2020 to provide guidance to AIs on the frequently asked questions published by the Basel Committee on Banking Supervision (BCBS) on prudential issues relating to the benchmark reform. Continue reading

HKMA to monitor industry’s progress in preparing for transition from IBORs to ARRs

In a circular issued to authorised institutions (AIs) on 23 October 2019, the Hong Kong Monetary Authority (HKMA) indicated that it will conduct a regular survey to collect information on AIs’ exposures referencing interbank offered rates (IBORs) and their progress in preparing for transition to alternative reference rates (ARRs). Depending on the survey results, the HKMA will take appropriate follow up action.

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Be on the mark – APAC central banks release study of benchmark reform implications

On 24 September 2019, the Executives’ Meeting of East Asia-Pacific Central Banks (EMEAP) published its study on the implications of benchmark reform across the East Asia and Pacific region (Study), including the effects of LIBOR discontinuation, the EU Benchmarks Regulation (BMR) and the ongoing reform of local benchmarks.

The Study provides important insight into market participants’ varying levels of awareness of and preparedness for benchmark reform, as well as valuable guidance as to future regulatory developments we are likely to see from regulators keen to ensure regional markets are well equipped to handle these reforms. The Study also refers extensively to Herbert Smith Freehills’ market-leading work on the BMR with ASIFMA.

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