2022-09-27 17:12, act 2022-09-27 17:28
It is assumed that from December 22, market participants will be able to use the WIRON index in new financial instruments, according to the WIBOR reform “Road Map” published on Tuesday.
“In the fourth quarter, the WIRON Index Administrator (GPW Benchmark) closes the adjustment process, ensures the availability of the index and publishes the relevant documentation. All formal requirements allowing for the application of the WIRON index on the financial market are met. In the fourth quarter, it is assumed that changes to the ISDA Definitions documentation will be published, taking into account the new WIRON index. This change is crucial from the point of view of disseminating the index on the international market, and at the same time increasing the possibility of concluding derivative transactions and developing the market of financial instruments using the new benchmark “- it was written in the document.
“Preparations are underway for the publication of analytical documents and recommendations developed by the National Working Group, which will define the standards for the use of the WIRON index in credit products, debt instruments and derivatives. The documentation will include, in particular, the recommended catalog of interest conventions for instruments using WIRON. It is assumed that from December In 2022, market participants will be able to use the WIRON index in new financial instruments “- added.
As noted, the National Working Group for the reform of benchmarks (NGR) was established in the third quarter, defining the objectives, scope and mode of its operation. The NGR Steering Committee chose WIRON as the recommended index to replace the current WIBOR benchmark.
From ’23, banks will be able to offer loans using the WIRON index in parallel with the WIBOR loans offered so far.
According to the document, the main task of the reform for 2023 is to ensure the gradual introduction of the newly selected benchmark to contracts and financial instruments – building a viable basis for the reconstruction of the functioning of the financial system.
“Basic assumption: the WIRON benchmark is fully available and applicable in financial products and instruments for entities that are ready to use it” – it was written.
“Banks may introduce loans using the WIRON index in parallel with the WIBOR loans offered so far. New products are offered, including loan products for entrepreneurs (capital companies with interest rates referring to the WIRON index)” – added.
According to the assumptions, in 2023 the process of building liquidity on the OIS derivatives market, for which WIRON is to be the reference index of the interest rate, is to continue.
“In the initial phase, the concluded swap transactions are bilateral, ie they will be settled between two parties to the contract. The gradual building of liquidity on the derivatives market is aimed at generating a forward curve for the WIRON index, which is conducive to the development of the cash market” – it was written.
“Changes to the ISDA Definitions and IBOR Fallbacks Protocol documentation are being published, including the introduction of provisions regarding the principles of replacing the WIBOR indicator in existing derivatives. The assumption adopted by NGR is to recommend the use of the fallback rate method based on the standard currently used in the case of other IBOR indicators, ie on the basis of the 5-year difference in the course of the current and the new benchmark “- added.
In 2023, the prerequisites for the occurrence of a regulatory event are also to be verified in accordance with Article 23c (1) of the WMD Regulation.
“The regulatory event will be the basis for designating in the regulation of the Minister of Finance, under the statutory procedure, a substitute for the key benchmark WIBOR. Under the regulation of the Minister of Finance, the substitute will apply to contracts and financial instruments that meet the conditions set out in the BMR regulation. The regulation of the Minister of Finance will also define the correction spread and the date from which the substitute will be applied “- it was noted. (
In ’24, it is planned to build a space for withdrawing products and instruments using WIBOR for WIRON
“The offer of banks and other entities includes new products using WIRON, mainly for consumers and sole proprietorships, civil partnerships. In particular, banks offer home loans interest at a compound rate based on the WIRON index with the simultaneous development of the market of housing loans using a fixed / periodically fixed interest rate “- it was written.
“Own bonds are issued on the debt market, including bank bonds as well as corporate and municipal bonds using the WIRON index or a fixed interest rate. National and international clearing houses (KDPW_CCP, LCH etc.) achieve regulatory and operational readiness and begin central clearing of derivative transactions OIS, for which WIRON is to be the reference index of the interest rate “- added.
As the authors point out, as a result of the above, the derivatives market moves from the phase of bilateral transactions to the phase of centrally cleared transactions.
“A key element of the market infrastructure is provided, which is the swap clearing service applying the new benchmark. The OIS market achieves the desired liquidity necessary to build a forward curve for WIRON,” it was written.
“By the end of the year, clearing houses are also ensuring the conversion of existing derivative contracts using the WIBOR benchmark into instruments using WIRON – based on the provisions of the ISDA IBOR Fallbacks Protocol,” added.
The WIBOR reforms assume the widespread use of the new RFR benchmark in ’25
“According to the assumptions of the Road Map of the National Working Group, the readiness is assumed to cease the calculation and publication of the WIBID and WIBOR Reference Rates” – it was written.
“After the entry into force of the Regulation of the Minister of Finance, financial institutions convert existing contracts and instruments using WIBOR, taking into account the principles set out in the regulation. The interest clauses use the substitute and the correcting spread indicated in the Regulation of the Minister of Finance” – added.
pat / asa /