Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna
PKO BP S.A.
Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna (PKO BP) is one among the largest commercial banks in Poland in terms of assets, net profit, total equity, loans and deposits portfolio, number of customers and size of the distribution network.
ID: 169223831949-55
Lobbying Activity
Response to Designation of a statutory replacement rate for CHF LIBOR (Benchmarks)
31 Aug 2021
PKO Bank Polski S.A. would like to express our appreciation for the initiative of the European Commission (“EC”) to prepare the draft Regulation on the replacement of CHF LIBOR. The statutory replacement rate will prevent serious disruption in financial markets that would otherwise occur following the cessation of CHF LIBOR publication. The replacement proposed in the EC consultation - SARON Compound Rates under Last Reset plus market-accepted ISDA compensation spreads – is a very good solution as it is based on market rates and “last reset” method is consistent with the SNWG recommendation.
We would appreciate to have the Regulation finalized as soon as possible by end of September 2021 the latest.
We would like to draw your attention to two points which may rise interpretation issues and please find some suggestions that PKO BP would like to point out for your kind consideration to potentially include in the final text of the Regulation:
1) Please consider expanding the definition of absent fall-back provision in last sentence of paragraph (9). We’re of the opinion that a more open wording, i.e. one without the “due to compliance concerns” and including reference to “permanent absence” of benchmark would be more accommodating and more robust. For one, it wouldn’t arbitrarily limit the reasons for which the benchmark is no longer published (“compliance concerns” is a vague term) and furthermore it would make sure that often used clauses meant to provide a temporary bridge quotation in case of short, 1-2 day pause in publication of benchmark aren’t interpreted as valid fall-backs;
2) The obligation outlined in Article 2, expecting the credit institutions to “inform their counterparts of the change in the rate and the effects on their contracts in writing and not later than thirty days before the statutory replacement rate starts to apply” is worded broadly and thus open to interpretation. Please consider the following changes:
a. the information should be sent to all clients at the same moment, i.e. not later than 30 days before the Regulation comes in force on 1st of January 2022, not 30 days before the replacements starts to apply to the individual contract (i.e. application of new rate for individual contract which may vary);
b. because the information is expected to be delivered 30 days in advance (i.e. before the exact rate for particular contract is known), the Regulation should stipulate that it’s for illustrative purposes only – for example it can include a calculation of instalments for a typical loan, where 3M CHF LIBOR fixings were replaced by 3M SARON Compound Rate + adjustment spread calculated as per Regulation; bank will obviously still deliver relevant calculations for client’s individual loan in the course of regular communication, as agreed in the contract;
Below please find proposed wording for those paragraphs:
Paragraph 9, page 2: “Regulation (EU) 2016/1011 requires that users of benchmarks produce and maintain robust written plans setting out the actions that they would take in the event that a benchmark materially changes or ceases to be provided and, where feasible and appropriate, designate one or several alternative benchmarks as fall-backs for a benchmark that would no longer be published. Contracts referencing CHF LIBOR have been concluded long before the cessation of CHF LIBOR could be foreseeable and before Regulation (EU) 2016/1011 started to apply. Those contracts do not contain fall-back provisions that address the unlikely event that a benchmark administrator can permanently cease publication of a contractual reference after a certain date.”
Article 2, page 5: “Information sharing. Credit institutions and other financial institutions that are a party to a CHF LIBOR contract shall inform their counterparts of the change in the rate and provide an example illustrating effects on typical contract in writing and not later than thirty days before the Regulation starts to apply"
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