ICE Benchmark Administration Redacted Minutes

Meeting: LIBOR Oversight Committee Date: Thursday 21st January, 15:30 Location: Board Room, IBA Offices, Chiswell Street Attendees:

Joanna Perkins (Chair) Deborah Land (Secretary)

David Bowman – Observer (T) David Clark

Clare Dawson Ed Dew - Observer

David Goone John Grout

John Harding George Handjinicolaou

Finbarr Hutcheson Brad Hurrell

Sébastien Kraenzlin – Observer (T) Kevin Ludwick

Mary Miller Michel Prada

Frederick Sturm Emma Vick

Andre Villeneuve Paul Watson

Apologies:

Guy Sears Richard Kennedy

In attendance from IBA: Andrew Hill Mike Langhorn, ICE James Montlake Stylianos Tselikas Circulation: IBA Website ____________________________________________________________________________ Agenda Items/Questions Raised

Introductions  were  made  to  Mary  Miller,  a  new  IBA  Board  INED.  

1. 2015 Audit plan A  presentation  was  given  on  the  IBA  and  ICE  Inc.  audit  team  make-­‐up  and  the  2015  audit  plan.        A  Committee  member  asked  for  some  clarity  on  ICE  Inc.  and  ICE  BA  hierarchy,  specifically  what  scope  ICE  BA  have  for  input?  The   Committee   were   informed   that   whilst   ICE   Inc.   had   overarching   standards   ICE   BA’s   opinions   and  suggestions  were  welcomed.    The  Chair  reminded  the  Committee  that  the  IOSCO  review  process  would  be  starting  soon,  and  re-­‐checked  that  the  Committee  were  still  happy  with  the  decision  made  to  defer  the  external  audit?  All  were  still  happy  with  the  previously  advised  audit  plan  and  deferral  of  an  external  audit.      

2. Dashboard – for discussion IBA  talked  the  Committee  through  the  aggregated  dashboard  from  go  live  2014.    Notably  they  shared  that  there  were  around  70  –  80  alerts  per  day,  with  peaks  in  EURO  at  quarter  end  and  half-­‐year  end  and  in  CHF  at   the   end   of   2014   following   the   SNB   actions.   USD   showed   year   end   alerts   in   December   due   to   price  movements  (e.g.  FED  funds  effective).    It  was  shared  with  the  Committee  that  there  has  been  a  significant  decrease  in  the  number  of   lates  since  IBA  took  full  collection  and  calculation  responsibility  from  Thomson  Reuters.       3. Minutes  of  the  meeting  on  17th  December  2014  

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The  minutes  were  agreed.    4. Matters  arising  from  the  minutes    Revised  template  IBA  are  currently  having  bilateral  meetings  with  the  banks  to  determine  the  impact  of  migrating  to  the  new  format.    IBA  expected  to  have  a  view  on  what  implementation  is  required  and  the  timeframe  for  this  by  the  next  Oversight  Committee  meeting.    5. Evolution  of  LIBOR  -­‐  presentation  IBA  gave  the  Committee  a  background  of,   feedback   from  and  charted  results  of   the  usage  questionnaire,  historical  transaction  data  analysis  and  the  position  paper.    IBA  ran  through  a  first  cut  of  the  analysis  of  historical  data  detailing  feasibility  of  using  transaction  data.    It  was  agreed  that  a  CF40  who  used  transactions  with  declining  weighting  over  time  would  come  in  and  talk  to  the  Committee.    IBA  gave  feedback  on  the  Position  Paper  along  with  a  reminder  of  proposals  and  informed  the  Committee  that  this  feedback  would  be  presented  at  a  CF40  LIBOR  Position  Paper  Feedback  meeting  that  was  taking  place  on  the  26th  January.    IBA  would  then  seek  to  have  further  meetings  to  identify  an  agreed  approach.    IBA  agreed  to  update  the  Committee  when  more  results  had  been  received.    6. FRNs  –  update  from  the  Working  Group  The  Working  Group  responded  to  a  question  previously  asked  by  a  Committee  member  ‘could  you  use  an  FRN  to  inform  yourself?    On  which  day  of  the  life-­‐cycle  of  the  FRN  you  could  use  it’?        The  Working  Group  said  that   there   is  a  panel  bank  which  uses  FRNs  to   inform  their  submissions.  An  FRN  would   qualify   as   an   actual   transaction  which   enters   their   balance   sheet.   They  would   inform   their   LIBOR  submission   on   the   day   investors   are   locked   in   by   calculating   a   synthetic   rate.   They   do   that   by   adding  (subtracting   if   there  were  a  negative  yield  curve)   to   the   fixed  spread  over   the  3M  Libor   for   the  one  year  FRN,      the  1Y3s    swap  price  (for  a  1  year  submission)  on  the  spot  value  date  (T+2).   If  the  FRN  book  closes  after  11.00  am  the  Libor  submission  of  the  following  day  would  be  informed  using  the  same  methodology.  Brokers’  quoted  prices  would  be  retained  to  evidence  the  swap  price.      It  was    felt  that  this  was  consistent  with  the  Wheatley  Waterfall  as  it  would  be  used  to  inform  submissions  only  on  that  basis  and  that  an  underlying  transaction  existed,  albeit   in   the  short   term  capital   rather   than  cash  markets.      The  Working  Group  were  asked  to  draw  up  something  that  the  Committee  could  agree  and  publish  as  this  advice  would  help  guide  submitters  when  the  Waterfall  was  being  used  to  inform  submissions.    7. LIBOR  Code  of  Conduct  An  updated  version  of  the  Code  of  Conduct  was  shared,  taking  into  account  previous  recommendations  on  tightening  language,  giving  it  more  uniformity,  removing  ambiguity  and  aligning  with  MAR8.        The  Committee  were  asked  if  they  felt  that  this  paper  made  for  a  proper  foundation  stone?    Following  the  Evolution   of   LIBOR   enquiries  will   this   be   adaptable   enough?     The   Committee   gave   their   approval   to   the  updated  document.    The   Committee   spoke   about   having   a   forum   or   safe   haven   for   banks   to   share   best   practice.       It   was  considered   to  be   important   to   the  Evolution  of   LIBOR  as   it  would  promote  certainty  around  submissions  and  could  be  based  on  transactions  going  forward  but   it  was  agreed  that  to  achieve  qualitative  change  a  mechanism  would  be  needed  to  drive  it.  

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 A  scoping  group  was  formed  to  investigate  the  feasibility  of  such  a  forum  (subject  to  any  relevant  legal  or  regulatory  constraints  which  might  be  identified).    It  was  proposed  to  send  the  document  to  the  FCA  for  initial  comments  and  then  proceed  with  talking  to  the  Panel  Banks;  possibly  with  an  output  statement  letter  to  banks.    8. Committee  review  Deferred  to  next  meeting.  

   

9. Proposed  date  and  time  of  next  meeting  15:30  –  17:30,  24th  February  2015,  Boardroom,  IBA  Offices,  Milton  Gate  

   10. AOB  The  Chair  requested  that  members  declared  any  conflicts  of  interest  to  IBA  in  preparation  for  discussion  at  the  next  Oversight  Committee.