11 March 2024
Communique of GPW Benchmark
on the repeal of the decision to cease the provision of WIBID and WIBOR Reference Rates for 1Y Fixing Tenor
GPW Benchmark, which is a benchmark administrator, informs that on the proposal for the change of the method subbmitted by the Bankowy Fundusz Gwarancyjny (“BFG” or Bank Guarantee Fund which is a Polish bank deposit guarantee scheme and resolution authority) according to the Procedure of review and change of the Interest Rate Benchmarks Methods1, decided to repeal the decision on the cessation of the provision of WIBID and WIBOR Reference Rates for 1Y Fixing Tenor.
The reason of the BFG proposal to repeal the decision to cease the provision of WIBID and WIBOR Reference Rates for 1Y Fixing Tenor is the systemic risk and risk for the stability of financial sector, including the legal risk for the continuity of some contracts and financial instruments. The BFG pleaded in favor of taking into account the fact, that the Steering Committee of the National Working Group for benchmark reform has modified its decision on the schedule of The Roadmap for replacing WIBOR and WIBID benchmarks with a new benchmark2.
In reaction to the BFG proposal, the administrator decided to repeal the decision to cease the provision of 1Y Fixing Tenor of WIBID and WIBOR Reference Rates which was supposed to enter into force as of 2 January 2025, the date established as a result of public consultation. The result of the consultations and all other activities conducted by the administrator do not allow to reach the conclusion that the user of the WIBID and WIBOR Reference Rates would be able to cope with consequences of the cessation of the provision of 1Y Fixing Tenor and avoid the risk and difficulties in ensuring the continuity of the contracts and financial instruments.
Hence, the administrator once again has considered the arguments of the users of the WIBID and WIBOR Reference Rates as well as the arguments presented by the BFG and as a result the administrator decided not to take the measures aiming at the cessation of 1Y Fixing Tenor. This decision is compatible with the goal of the currently conducted benchmark reform which consists in gradually retreating from using WIBID and WIBOR Reference Rates till the moment of the full readiness Polish financial sector to full cessation of their provision. On the same time, the administrator stresses the fact that, notwithstanding the Roadmap, it remains in full competence to take any measure in respect of the benchmarks provided by it if required by the law.
The administrator also underlines the fact that the repeal of the decision to cease the provision of 1Y Fixing Tenor and to combine the cessation with the schedule of the Roadmap does not mean that as in case of any longer fixing tenor, the replacement principles which could be set by the Minister of Finance3, would ensure the full absence of the consequences for the operational activity and decision of the users.
The administrator reminds that taking into account t the characteristic of the looking forward interest rates like WIBOR and those of backward looking interest rates like WIRON, the potential replacement of the longer Fixing Tenors does not always ensure the implementation of the replacement indices with the same maturities. It is sufficient to look at the case of LIBOR CHF to SARON replacement principles4. The above disclaimer does not refer to any opinion of the Steering Committee but only constitutes the administrator’s recommendation to reduce the exposure to WIBID and WIBOR Reference Rates in financial products based on longer Fixing Tenors, esp. 1Y Fixing Tenor.