AMIC Regulatory Update

Latest developments

ICMA’s European Repo and Collateral Council (ERCC) has published its guide to reporting repo transactions under the EU Securities Financing Transactions Regulation (SFTR). The ICMA guide aims to help members interpret the regulatory reporting framework specified by ESMA and sets out complementary best practice recommendations to provide additional clarity and address ambiguities in the official guidance. It is supplemented by a suite of sample reports and an overview of repo life-cycle event reporting.

ICMA has published its Quick Guide to the transition to risk-free rates in the bond market, which is intended to highlight progress on the key issues on which ICMA is focused in this area and provide links to relevant resources on the topic. A short podcast is also available.

The next AMIC Conference will take place in Paris, on 11 March, in partnership with AF2I and will be hosted by BNP Paribas Asset Management. The conference will have a keynote speech from Steffen Kern, Chief Economist and Head of Risk Analysis, ESMA. It will also feature panels on fund liquidity and leverage, challenges and opportunities in the current investment environment, sustainable finance and asset allocation. The event is free to attend for all but registration in advance is essential.

The next AMIC Executive Committee meeting will also take place in Paris on 11 March.


ICMA Asset Management and Investors Council (AMIC) Regulatory Update

Pension and Insurance

20 February 2020 Speech by Gabriel Bernardino (EIOPA) on winning the race towards a global Insurance Capital Standard

Speech by Gabriel Bernardino, Chairman of European Insurance and Occupation Pensions Authority (EIOPA), on winning the race towards a global Insurance Capital Standard.

As it was recognized by the Financial Stability Board in 2013, the development of a sound capital and supervisory framework for the insurance sector is essential for supporting financial stability. Since then, the International Association of Insurance Supervisors (IAIS) has embarked on a journey to develop a comprehensive, group-wide supervisory and regulatory framework for Internationally Active Insurance Groups (IAIGs), including a quantitative Insurance Capital Standard (ICS).

To develop an international standard is a hard task and requires patience, strong commitment and leadership. That’s what EIOPA expects from the leaders of all European supervisors and all European IAIGs.

20 February 2020 EIOPA publicly consults on implementing technical standards for supervisory reporting and cooperation for the Pan-European Personal Pension Product (PEPP)

The European Insurance and Occupation Pensions Authority (EIOPA) has launched the public consultation on implementing technical standards for supervisory reporting and cooperation as mandated by the Pan-European Personal Pension Product (PEPP) Regulation.

The proposals specify the annual supervisory reporting requirements on PEPP and formalise the notifications required by the PEPP Regulation to facilitate efficient processes in the cooperation between competent authorities and EIOPA. The regular, annual submission of information on the PEPP business and efficient communication channels between competent authorities are key building blocks of the supervisory framework for the PEPP. 

Risk management

21 February 2020 Speech by Philip Lane (ECB) on the monetary policy toolbox and the evidence from the euro area

Speech by Philip Lane, Member of the Executive Board of the European Central Bank (ECB), on the monetary policy toolbox and the evidence from the euro area.

The focus of this year’s US Monetary Policy Forum, the analysis of unconventional monetary policies, is relevant for many economies, including the euro area. That said, while central banks face many common challenges, the evolution of economic, financial and monetary conditions in the euro area was also specifically influenced by both the euro area sovereign debt crisis that followed the global financial crisis and the European policy responses to these crises. As a result, the euro area is at a different point in the monetary policy cycle than other jurisdictions.

Globally, central banks have been confronted with large and persistent shocks stemming from the financial crisis and the long-term trend decline in the equilibrium real interest rate. These factors have constrained conventional monetary policy space and required a profound expansion of the policy toolbox in order to ensure the effectiveness of monetary policy.

24 February 2020 G20 FinMins & CBGs publishes a communiqué along an annex of issues for further action

The G20 Finance Ministers and Central Banks Governors (CBGs) have published a communique along an annex of issues for further action.

Considering the continuing process of financial regulatory reform, this communiqué includes statements that:

  • An open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth;
  • We remain committed to the full, timely and consistent implementation of the agreed financial reforms. We continue to evaluate the effects of reforms and look forward to the FSB’s evaluation of the effects of Too-Big-To-Fail reforms. We will continue to work to address unintended, negative effects of market fragmentation, including through regulatory and supervisory cooperation;
  • We will continue to identify, monitor and, as necessary, address vulnerabilities and emerging risks to financial stability, including those related to non-bank financing. According to the circumstances, macro-prudential policies can be part of the toolkit; and
  • We emphasize that markets need to transition away from LIBOR to alternative reference rates before end-2021. Therefore, urgent work is needed by the private sector, supported by the public sector, to manage this transition, given the risks that may arise if parties are insufficiently prepared for the expected discontinuation of widely used LIBOR benchmarks. Given the short time remaining for this transition to take place, substantial progress is needed in 2020 to address the potential financial stability risks. We ask the FSB to identify remaining challenges to benchmark transition by July 2020 and to explore ways to address them. 

24 February 2020 FCA publishes feedback statement on Patient Capital and Authorised Funds

The Financial Conduct Authority (FCA) has published a Feedback Statement (FS20/2) on Patient Capital and Authorised Funds.

This Feedback Statement summarises responses from DP18/10 on whether there are unnecessary barriers to investing in patient capital through authorised funds. We discuss the feedback as well as a proposal from the Investment Association for a new type of fund.

26 February 2020 ESRB publishes report on macroprudential policy for the insurance sector

The European Systemic Risk Board (ESRB) has published a report on macroprudential policy for the insurance sector.

In line with its strategy for expanding macroprudential policy beyond banking, the ESRB believes that the review of the Solvency II regulatory regime for insurance in the EU, which is envisaged to be completed by the end of 2020, should result in a revised framework that better reflects macroprudential considerations. 


19 February 2020 ISDA publishes results of Consultation on Fallbacks for Derivatives Referencing Euro LIBOR and EURIBOR

The International Swaps and Derivatives Association (ISDA) has published a statement summarizing responses to a supplemental consultation on the spread and term adjustments that would apply to fallbacks for derivatives referencing euro LIBOR and EURIBOR.

The supplemental consultation, which was launched in December 2019, also covers technical issues related to the adjustment methodology, and seeks feedback on whether the adjustments would be appropriate for lesser-used interbank offered rates (IBORs) if ISDA implements fallbacks for those benchmarks in the future.

26 February 2020 BoE's risk management approach to collateral referencing LIBOR for use in the Sterling Monetary Framework - Market Notice

The Bank of England's (BoE's) risk management has made an approach to collateral referencing LIBOR for use in the Sterling Monetary Framework - Market Notice.

Throughout this Market Notice, LIBOR Linked Loans refers to loans maturing after 31 December 2021, where the borrower currently pays a rate of interest calculated by reference to LIBOR or will revert to paying a rate of interest calculated by reference to LIBOR. A LIBOR Linked Loan Portfolio refers to Loan Portfolios where one or more loans in the portfolio is a LIBOR Linked Loan.

26 February 2020 Speech by Andrew Hauser (BoE) on why 2020 is the year for action on turbo-charging sterling LIBOR transition

Speech by Andrew Hauser, Executive Director, Markets of the Bank of England (BoE), on why 2020 is the year for action on turbo-charging sterling LIBOR transition.

In his speech, Andrew Hauser, announced two new initiatives aimed at further supporting risk free rate transition.

Firstly, the Bank intends to publish a daily SONIA Compounded Index. This would support the use of SONIA in as wide a range of financial products as possible by simplifying the calculation of compounded interest rates. 

Secondly, Andrew announces that from October 2020 the Bank will begin increasing haircuts on LIBOR-linked collateral it lends against.  From 2020 Q3, the Bank will progressively increase the haircuts on LIBOR-linked pre-positioned collateral.  Haircuts are scheduled to reach 100% (i.e. implying effective ineligibility) at the end of 2021.

26 February 2020 FCA issues Dear CEO letter to asset management firms about LIBOR transition

The Financial Conduct Authority (FCA) has issued a Dear CEO letter to asset management firms urging them to prepare now for the end of LIBOR.

The FCA noted that they expect firms to take proactive steps now where appropriate and not to wait for instructions from clients. Firms should not expect or base their transition plans on future regulatory relief or guidance or on legislative solutions.

26 February 2020 BoE seeks supporting Risk-Free Rate transition through the provision of compounded SONIA

In order to accelerate the adoption of SONIA as a reference rate in sterling markets, the Bank of England has been seeking views from sterling market participants on:

  • The Bank’s intention to publish a daily SONIA Compounded Index. This is intended to support the use of SONIA in a wide range of financial products by simplifying the calculation of compounded interest rates; and
  • The usefulness of the Bank publishing a simple set of compounded SONIA Period Averages, which would give users easy access to SONIA interest rates compounded over a range of set time periods. As the set periods used to generate such averages cannot always align with those currently applied in products referencing SONIA, the Bank is seeking to establish whether there is market consensus on how to define the relevant time periods. The Bank is inviting comment on the options presented in this paper, after which it will decide whether it would be helpful to publish such averages.

27 February 2020 BCBS publishes newsletter on benchmark rate reforms

The Basel Committee on Banking Supervision (BCBS) has published a newsletter on benchmark rate reforms. The newsletter underscores that the BCBS supports the global efforts to strengthen the robustness and reliability of existing inter-bank offered rates (IBORs) and promote the development of alternative reference rates. 

27 February 2020 ICMA publishes Quick Guide to the transition to risk-free rates in the bond market

ICMA has published its Quick Guide to the transition to risk-free rates in the bond market, which is intended to highlight progress on the key issues on which ICMA is focused in this area and provide links to relevant resources on the topic.

The transition from the long established IBORs (including LIBOR) to alternative near risk-free reference rates (RFRs) is a major challenge for global financial markets, with the deadline for the potential demise of LIBOR set for the end of 2021. ICMA, representing the international bond market, is involved with various official sector sponsored working groups relating to this transition. The Quick Guide summarises the position as of today's date and will be updated at intervals as other developments arise.


Sustainable Finance

27 February 2020 Launch of COP26 Private Finance Agenda

The Governor of the Bank of England, Mark Carney, has launched the ‘COP26 Private Finance Agenda’ at the Guildhall, London.

The objective of the COP26 Private Finance Agenda is for every professional financial decision to take climate change into account. The right framework for reporting, risk management and returns will embed these considerations and help finance a whole economy transition. To achieve net zero, every company, bank, insurer and investor will need to adjust their business models for a low carbon world.

28 February 2020 IAIS and SIF publish issue paper on the recommendations of the TCFD

The International Association of Insurance Supervisors (IAIS) and Sustainable Insurance Forum (SIF) have published an Issues Paper on the Implementation of the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Recognising the diversity of supervisory frameworks across jurisdictions, the Paper identifies a number of areas where supervisors can encourage strengthened disclosures through the application of existing supervisory tools.


25 February 2020 OECD publishes summary on sustainable cyber insurance markets

The Organisation for Economic Co-operation and Development (OECD) has published a summary on sustainable cyber insurance markets.

In an era of increasing reliance on digital technologies – and the growing exposure to cyber risks that accompany that reliance – cyber risk insurance can make an important contribution to providing financial protection and helping policyholders prevent and respond to cyber incidents. This summary shares some of the findings from two examinations on the role of public policy and regulation in supporting the development of a sustainable cyber insurance market.



Upcoming ICMA Courses

Collateral Management London, 30-31 March
Inflation-Linked Bonds and Derivatives London, 2-3 April
Fixed Income Certificate (FIC) Amsterdam, 18-22 May
Fixed Income Portfolio Management & Construction London, 27-29 May
Financial Markets Foundation Qualification (FMFQ) London, 3-5 June 
Securitisation: An Introduction London, 16-17 September



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