We analyse the stability of the cross-market shock transmission mechanism between banks and sovereign bonds during the Eurozone sovereign debt crisis for crisis-hit periphery countries and Germany. We also examine the shock propagation of banking shocks and sovereign bond shocks between domestic and external markets. Using a Markov-switching framework, we find strong evidence of bilateral contagion between banks and sovereign bonds and also between domestic and external banking sectors. Sovereign bond markets are different. An external shock only produces contagious effects in Greece, who were largely dependent on external aid. For all the others, external shocks lead to decoupling as investors became increasingly discerning in their perception of the debt instruments issued by different Eurozone states.
{"title":"Banks and Sovereigns: Did Adversity Bring Them Closer?","authors":"Mardi Dungey, T. Flavin, Lisa Sheenan","doi":"10.2139/ssrn.3627639","DOIUrl":"https://doi.org/10.2139/ssrn.3627639","url":null,"abstract":"We analyse the stability of the cross-market shock transmission mechanism between banks and sovereign bonds during the Eurozone sovereign debt crisis for crisis-hit periphery countries and Germany. We also examine the shock propagation of banking shocks and sovereign bond shocks between domestic and external markets. Using a Markov-switching framework, we find strong evidence of bilateral contagion between banks and sovereign bonds and also between domestic and external banking sectors. Sovereign bond markets are different. An external shock only produces contagious effects in Greece, who were largely dependent on external aid. For all the others, external shocks lead to decoupling as investors became increasingly discerning in their perception of the debt instruments issued by different Eurozone states.","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134395257","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The current crisis, at the time of writing, has had a profound impact on the financial world, introducing the need for creative approaches to revitalising the economy at the micro level as well as the macro level. In this informal analysis and design proposal, we describe how infrastructure for digital assets can serve as a useful monetary and fiscal policy tool and an enabler of existing tools in the future, particularly during crises, while aligning the trajectory of financial technology innovation toward a brighter future. We propose an approach to digital currency that would allow people without banking relationships to transact electronically and privately, including both internet purchases and point-of-sale purchases that are required to be cashless. We also propose an approach to digital currency that would allow for more efficient and transparent clearing and settlement, implementation of monetary and fiscal policy, and management of systemic risk. The digital currency could be implemented as central bank digital currency (CBDC), or it could be issued by the government and collateralised by public funds or Treasury assets. Our proposed architecture allows both manifestations and would be operated by banks and other money services businesses, operating within a framework overseen by government regulators. We argue that now is the time for action to undertake development of such a system, not only because of the current crisis but also in anticipation of future crises resulting from geopolitical risks, the continued globalisation of the digital economy, and the changing value and risks that technology brings.
{"title":"Digital Currency and Economic Crises: Helping States Respond","authors":"Geoffrey Goodell, H. D. Al-Nakib, Paolo Tasca","doi":"10.2139/ssrn.3622089","DOIUrl":"https://doi.org/10.2139/ssrn.3622089","url":null,"abstract":"The current crisis, at the time of writing, has had a profound impact on the financial world, introducing the need for creative approaches to revitalising the economy at the micro level as well as the macro level. In this informal analysis and design proposal, we describe how infrastructure for digital assets can serve as a useful monetary and fiscal policy tool and an enabler of existing tools in the future, particularly during crises, while aligning the trajectory of financial technology innovation toward a brighter future. We propose an approach to digital currency that would allow people without banking relationships to transact electronically and privately, including both internet purchases and point-of-sale purchases that are required to be cashless. We also propose an approach to digital currency that would allow for more efficient and transparent clearing and settlement, implementation of monetary and fiscal policy, and management of systemic risk. The digital currency could be implemented as central bank digital currency (CBDC), or it could be issued by the government and collateralised by public funds or Treasury assets. Our proposed architecture allows both manifestations and would be operated by banks and other money services businesses, operating within a framework overseen by government regulators. We argue that now is the time for action to undertake development of such a system, not only because of the current crisis but also in anticipation of future crises resulting from geopolitical risks, the continued globalisation of the digital economy, and the changing value and risks that technology brings.","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127823477","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using intraday data, I separately identify the Bank of England's forward guidance and quantitative easing surprises during the effective lower bound period in the UK. Then, I estimate asset price responses to these unconventional monetary policies. I show that both surprises significantly move gilt yields and term premia on days of monetary policy announcements. However, their impact persists for only a few months. I further document that only forward guidance is effective in moving stock prices and their volatility. While both surprises influence the British pound, the impact of forward guidance persists for at least six months.
利用盘中数据，我分别确定了英国央行(Bank of England)的前瞻指引和量化宽松政策在英国有效下限期间的意外之处。然后，我估计资产价格对这些非常规货币政策的反应。我表明，在货币政策宣布的日子里，这两个意外都显著影响了英国国债收益率和期限溢价。然而，它们的影响只会持续几个月。我进一步证明，只有前瞻性指导是有效的股票价格及其波动。虽然这两个意外都会影响英镑，但前瞻指引的影响至少会持续六个月。
{"title":"Identification of the Forward Guidance and QE Surprises in the UK","authors":"Derin Aksit","doi":"10.2139/ssrn.3657561","DOIUrl":"https://doi.org/10.2139/ssrn.3657561","url":null,"abstract":"Using intraday data, I separately identify the Bank of England's forward guidance and quantitative easing surprises during the effective lower bound period in the UK. Then, I estimate asset price responses to these unconventional monetary policies. I show that both surprises significantly move gilt yields and term premia on days of monetary policy announcements. However, their impact persists for only a few months. I further document that only forward guidance is effective in moving stock prices and their volatility. While both surprises influence the British pound, the impact of forward guidance persists for at least six months.","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"163 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-05-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133661293","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper we gauge the degree of interconnectedness and quantify the linkages between global and other systemically important institutions, and the global financial system. We document that the two groups and the financial system become more interconnected during the global financial crisis when linkages across groups grow. In contrast, during tranquil times linkages within groups prevail. Global systemically important banks contribute most to system-wide distress, but are also most exposed. Other systemically important institutions bear more individual market risk. The two groups and the global financial system also co-vary for periods of up to 60 days. In sum, both groups perform in ways that defy any straightforward categorization.
{"title":"Risk Spillovers and Interconnectedness between Systemically Important Institutions","authors":"A. Andrieș, S. Ongena, N. Sprincean, R. Tunaru","doi":"10.2139/ssrn.3597962","DOIUrl":"https://doi.org/10.2139/ssrn.3597962","url":null,"abstract":"In this paper we gauge the degree of interconnectedness and quantify the linkages between global and other systemically important institutions, and the global financial system. We document that the two groups and the financial system become more interconnected during the global financial crisis when linkages across groups grow. In contrast, during tranquil times linkages within groups prevail. Global systemically important banks contribute most to system-wide distress, but are also most exposed. Other systemically important institutions bear more individual market risk. The two groups and the global financial system also co-vary for periods of up to 60 days. In sum, both groups perform in ways that defy any straightforward categorization.","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"86 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-05-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114503622","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
After a first phasing out of the ECB’s net asset purchases at end-2018, the question of how a future tightening of the ECB’s monetary policy may affect countries located in the vicinity of the euro area has gained prominence, but has been left largely unanswered so far. Our paper aims to close this gap for the CESEE region by employing shock-specific conditional forecasts, a methodology that has been little exploited in this context. Besides demonstrating the usefulness of our framework, we obtain three key findings characterising the spillovers of ECB monetary policy to CESEE economies: first, a euro area monetary tightening does trigger sizeable spillovers to the CESEE region. Second, we show that in the context of a demand shock-induced monetary tightening, which is more realistic than the usual approach taken in the literature, CESEE countries’ output and prices actually respond positively. Third, spillovers on output and prices in CESEE countries are heterogeneous, and depend on the trajectory of euro area tightening. JEL Classification: C11, C32, E52, F42
{"title":"Who's Afraid of Euro Area Monetary Tightening? Cesee Shouldn't","authors":"André Geis, Isabella Moder, Tobias Schuler","doi":"10.2139/ssrn.3610734","DOIUrl":"https://doi.org/10.2139/ssrn.3610734","url":null,"abstract":"After a first phasing out of the ECB’s net asset purchases at end-2018, the question of how a future tightening of the ECB’s monetary policy may affect countries located in the vicinity of the euro area has gained prominence, but has been left largely unanswered so far. Our paper aims to close this gap for the CESEE region by employing shock-specific conditional forecasts, a methodology that has been little exploited in this context. Besides demonstrating the usefulness of our framework, we obtain three key findings characterising the spillovers of ECB monetary policy to CESEE economies: first, a euro area monetary tightening does trigger sizeable spillovers to the CESEE region. Second, we show that in the context of a demand shock-induced monetary tightening, which is more realistic than the usual approach taken in the literature, CESEE countries’ output and prices actually respond positively. Third, spillovers on output and prices in CESEE countries are heterogeneous, and depend on the trajectory of euro area tightening. JEL Classification: C11, C32, E52, F42","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126666009","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Monetary policy in the United States has often followed a gradual approach by changing policy rates through multiple small adjustments rather than all-at-once hikes or cuts. This conduct could provide a signal about the extent of the intended policy change. We quantify the state-dependent effects of monetary shocks in times of more and less gradual policy. We propose two indicators of high vs. low gradualism periods and use local projections to estimate the effects of identified high-frequency shocks in the two states. Our findings suggest that monetary policy transmission is stronger when the perception of gradualism is high.
{"title":"Monetary Policy Gradualism and the Nonlinear Effects of Monetary Shocks","authors":"Luca Metelli, Filippo Natoli, L. Rossi","doi":"10.2139/ssrn.3612969","DOIUrl":"https://doi.org/10.2139/ssrn.3612969","url":null,"abstract":"Monetary policy in the United States has often followed a gradual approach by changing policy rates through multiple small adjustments rather than all-at-once hikes or cuts. This conduct could provide a signal about the extent of the intended policy change. We quantify the state-dependent effects of monetary shocks in times of more and less gradual policy. We propose two indicators of high vs. low gradualism periods and use local projections to estimate the effects of identified high-frequency shocks in the two states. Our findings suggest that monetary policy transmission is stronger when the perception of gradualism is high.","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"90 3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131518275","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we make use of the results from Structural Bayesian VARs taken from several studies for the euro area, which apply the idea of a shock-dependent Exchange Rate Pass-Through, drawing a comparison across models and also with respect to available DSGEs. On impact, the results are similar across Structural Bayesian VARs. At longer horizons, the magnitude in DSGEs increases because of the endogenous response of monetary policy and other variables. In BVARs particularly, shocks contribute relatively little to observed changes in the exchange rate and in HICP. This points to a key role of systematic factors, which are not captured by the historical shock decomposition. However, in the APP announcement period, we do see demand and exogenous exchange rate shocks countribute significantly to variations in exchange rates. Nonetheless, it is difficult to find a robust characterization across models. Moreover, the modelling challenges increase when looking at individual countries, because exchange rate and monetary policy shocks (also taken relative to the US) are common to the whole euro area. Hence, we provide a local projection exercise with common euro area shocks, identified in euro area-specific Structural Bayesian VARs and in DSGE, extrapolated and used as regressors. For common exchange rate shocks, the impact on consumer prices is the largest in some new member states, but there are a wide range of estimates across models. For core consumer prices, the coefficients are smaller. Regarding common relative monetary policy shocks, the impact is larger than for exchange rate shocks in any case. Generally, euro area monetary policy plays a big role for consumer prices, and this is especially so for new member states and the euro area periphery.
{"title":"Shock Dependence of Exchange Rate Pass-through: A Comparative Analysis of BVARs and DSGEs","authors":"Mariarosaria Comunale","doi":"10.2139/ssrn.3577352","DOIUrl":"https://doi.org/10.2139/ssrn.3577352","url":null,"abstract":"In this paper, we make use of the results from Structural Bayesian VARs taken from several studies for the euro area, which apply the idea of a shock-dependent Exchange Rate Pass-Through, drawing a comparison across models and also with respect to available DSGEs. On impact, the results are similar across Structural Bayesian VARs. At longer horizons, the magnitude in DSGEs increases because of the endogenous response of monetary policy and other variables. In BVARs particularly, shocks contribute relatively little to observed changes in the exchange rate and in HICP. This points to a key role of systematic factors, which are not captured by the historical shock decomposition. However, in the APP announcement period, we do see demand and exogenous exchange rate shocks countribute significantly to variations in exchange rates. Nonetheless, it is difficult to find a robust characterization across models. Moreover, the modelling challenges increase when looking at individual countries, because exchange rate and monetary policy shocks (also taken relative to the US) are common to the whole euro area. Hence, we provide a local projection exercise with common euro area shocks, identified in euro area-specific Structural Bayesian VARs and in DSGE, extrapolated and used as regressors. For common exchange rate shocks, the impact on consumer prices is the largest in some new member states, but there are a wide range of estimates across models. For core consumer prices, the coefficients are smaller. Regarding common relative monetary policy shocks, the impact is larger than for exchange rate shocks in any case. Generally, euro area monetary policy plays a big role for consumer prices, and this is especially so for new member states and the euro area periphery.","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129982840","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Irma Alonso Alvarez, P. Serrano, Antoni Vaello-Sebastià
This article analyzes the impact of the unconventional monetary policies (UMPs) of four major central banks (the Fed, ECB, BoE and BOJ) on market uncertainty. We exploit the heterogeneity of different UMP actions to disentangle their influence on reducing the ex ante perception of extreme events (tail risks) using the information contained in risk-neutral densities from the most liquid stock index options. The empirical findings show that the announcement of UMPs reduces the risk-neutral probability of extreme events across various horizons and thresholds, supporting the hypothesis of the risk-taking channel. The most effective measures are the forward guidance and liquidity actions, rather than asset purchases. Interestingly, foreign UMP actions also prove to be significant variables affecting domestic tail risks, mainly at longer horizons. These results reveal an original cross-border effect of foreign UMPs on domestic tail risks. Finally, the dynamics of the UMPs are captured by a structural model that confirms a transitory impact of UMPs on market tail risk perceptions.
{"title":"The Impact of Heterogeneous Unconventional Monetary Policies on Market Uncertainty","authors":"Irma Alonso Alvarez, P. Serrano, Antoni Vaello-Sebastià","doi":"10.2139/ssrn.3576394","DOIUrl":"https://doi.org/10.2139/ssrn.3576394","url":null,"abstract":"This article analyzes the impact of the unconventional monetary policies (UMPs) of four major central banks (the Fed, ECB, BoE and BOJ) on market uncertainty. We exploit the heterogeneity of different UMP actions to disentangle their influence on reducing the ex ante perception of extreme events (tail risks) using the information contained in risk-neutral densities from the most liquid stock index options. The empirical findings show that the announcement of UMPs reduces the risk-neutral probability of extreme events across various horizons and thresholds, supporting the hypothesis of the risk-taking channel. The most effective measures are the forward guidance and liquidity actions, rather than asset purchases. Interestingly, foreign UMP actions also prove to be significant variables affecting domestic tail risks, mainly at longer horizons. These results reveal an original cross-border effect of foreign UMPs on domestic tail risks. Finally, the dynamics of the UMPs are captured by a structural model that confirms a transitory impact of UMPs on market tail risk perceptions.","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123744339","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Our aim is to explain the purchasing power of money based on the theory of subjective value and based on the direct application of the law of diminishing marginal utility to money. The paper follows the criticism of the Mises’s attempt to explain the problem by the concept of regression theorem presented in Pošvanc (2020b).
The basic line of explanation which has to be followed to explain the problem in question within the theory of subjective value will be as follows: the human subject (in the case of money human subjects) – a valuation – a scale of needs – an act of exchange – a price of money as inverse exchange ratio of money and goods.
Our explanation starts with some present time inconsistencies concerning the explanation of economic phenomena “over time” and related problem of value homogeneity. To explain phenomena “over time” is crucial for money because we use money over time as a basic anchor for mutual understanding among economic agents. It will be shown that to explain the phenomenon of price of money we need to make some modifications to the theory of subjective value to be applicable over time and to define some homogenous concepts men are dealing with when act.
Presented solution will be based than on three theories which explain a) intersubjective valuation of money, b) economic calculation without money and evolution of money-goods concept and c) explanation of the essence of the interest as an intersubjective phenomenon.
{"title":"A Brief Explanation of the Price of Money","authors":"Matúš Pošvanc","doi":"10.2139/ssrn.3562493","DOIUrl":"https://doi.org/10.2139/ssrn.3562493","url":null,"abstract":"Our aim is to explain the purchasing power of money based on the theory of subjective value and based on the direct application of the law of diminishing marginal utility to money. The paper follows the criticism of the Mises’s attempt to explain the problem by the concept of regression theorem presented in Pošvanc (2020b). <br><br>The basic line of explanation which has to be followed to explain the problem in question within the theory of subjective value will be as follows: the human subject (in the case of money human subjects) – a valuation – a scale of needs – an act of exchange – a price of money as inverse exchange ratio of money and goods. <br><br>Our explanation starts with some present time inconsistencies concerning the explanation of economic phenomena “over time” and related problem of value homogeneity. To explain phenomena “over time” is crucial for money because we use money over time as a basic anchor for mutual understanding among economic agents. It will be shown that to explain the phenomenon of price of money we need to make some modifications to the theory of subjective value to be applicable over time and to define some homogenous concepts men are dealing with when act. <br><br>Presented solution will be based than on three theories which explain a) intersubjective valuation of money, b) economic calculation without money and evolution of money-goods concept and c) explanation of the essence of the interest as an intersubjective phenomenon.","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122754803","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Libor is arguably the world’s most important number with more than USD 350 trillion of loans and financial contracts referencing this rate. Libor benchmark interest rates are being replaced with alternative reference rates (ARRs). There is no guarantee Libor rates will continue to be quoted beyond 2021. In this paper we give an overview of Libor benchmark reforms and assess its impact on financial services. We consider the structural changes to the new ARR benchmarks and highlight litigation risks when migrating existing financial contracts referencing Libor. Finally we conclude with 3 recipes of how to implement Libor reform based on robust, last-minute and no preparation. Whilst some may find the recipes humorous it is no laughing matter. We encourage financial service providers to be well prepared for the upcoming broad-sweeping industry changes and the associated risks.
{"title":"Libor Benchmark Reform: Recipes for Success & Disaster","authors":"N. Burgess","doi":"10.2139/ssrn.3555467","DOIUrl":"https://doi.org/10.2139/ssrn.3555467","url":null,"abstract":"Libor is arguably the world’s most important number with more than USD 350 trillion of loans and financial contracts referencing this rate. Libor benchmark interest rates are being replaced with alternative reference rates (ARRs). There is no guarantee Libor rates will continue to be quoted beyond 2021. \u0000 \u0000In this paper we give an overview of Libor benchmark reforms and assess its impact on financial services. We consider the structural changes to the new ARR benchmarks and highlight litigation risks when migrating existing financial contracts referencing Libor. \u0000 \u0000Finally we conclude with 3 recipes of how to implement Libor reform based on robust, last-minute and no preparation. Whilst some may find the recipes humorous it is no laughing matter. We encourage financial service providers to be well prepared for the upcoming broad-sweeping industry changes and the associated risks.","PeriodicalId":344099,"journal":{"name":"ERN: Banking & Monetary Policy (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128429014","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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