Aggregated News From Investment Management Regulators

FINMA Guidance 08/2020: LIBOR replacement for derivatives

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The Swiss Financial Market Supervisory Authority FINMA recommends that supervised institutions affected by the replacement of LIBOR sign the new Fallbacks Protocol published by the International Swaps and Derivatives Association (ISDA) as soon as possible.

The discontinuation of LIBOR is getting closer. The largest stock of legacy LIBOR-linked contracts are over-the-counter derivatives (OTC derivatives). In a survey of Swiss institutions conducted in June 2020, FINMA noted that OTC derivatives worth over CHF 11.5 trillion are contractually linked to LIBOR beyond the year 2021.

On 9 October 2020, the ISDA announced its IBOR fallback documents for such OTC derivatives (see link). FINMA recommends that the affected supervised institutions sign the Fallbacks Protocol and the expected equivalent adjustments to the Swiss Master Agreement for OTC derivative instruments as soon as possible. FINMA considers the application of the new fallback documents to as many OTC derivatives contracts as possible to be essential for minimising the high risks associated with the discontinuation of LIBOR. After the ISDA fallback documents enter into force in January 2021, no new LIBOR-linked OTC derivatives contracts should be entered into without robust fallback clauses.

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Regulator Information

Abbreviation: FINMA
Jurisdiction: Switzerland

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