Mediobanca has robust written plans ("Contingency Plans") to be triggered in the event of cessation or significant changes in the benchmarks used by Mediobanca to determine the value, yield or coupons, of products for counterparties and clients. Such reference indices include both the benchmark interest rates (EURIBOR, LIBOR, EONIA), whose ongoing reform is illustrated here, and other reference indices (e.g., equity indices such as S&P500 or FTSE MIB).
What are Contingency Plans
Pursuant to article 28(2) of the Benchmarks Regulation (EU) 2016/1011 (“Benchmarks Regulation”) Mediobanca draws up and maintains Contingency Plans to be triggered in event of cessation or significant changes of one or several benchmarks (cessation or substantial changes of one or more benchmark indices is defined, for the purposes of this description, as a "Benchmark Event").
The content of Mediobanca’s Contingency Plans
The Contingency Plans set out the procedures that the Bank implements in case of a Benchmark Event; where feasible and appropriate, the Plan indicates one or several alternative benchmarks that could be referenced to replace the one that is to be ceased or undergo significant changes (significant changes may be, for example, those that significantly alter the way in which the reference index is calculated) indicating the reasons why they are a viable alternative.
Following a cessation or material change of one or several benchmarks, Mediobanca will take the following steps:
- performs a qualitative assessment to determine the impact of the Benchmark Event on exposures and the number of contracts, clients and transactions affected;
- considers, if not already identified, a feasible and suitable alternative benchmark for existing financial instruments and contracts consulting the administrator of the benchmark due to cease or be significantly changed;
- defines a precise timeline and related milestones for the transition to the alternative benchmark supporting, where possible, an orderly transition;
- informs clients and counterparties of the Benchmark Event and the replacement by the alternative benchmark, providing them contact details if any questions arise;
- reflects, where possible, changes in relevant contractual relationships to which the ceased or modified benchmark refers.
When assessing alternative benchmarks, Mediobanca will refer to change and cessation policy published by the administrator of the benchmark that is to be ceased or undergo significant changes. In the event that the alternative benchmark identified prior to the occurrence of a Benchmark Event is subsequently found to be inadequate the Bank, on its own or – where possible - through a calculation agent, will refer to the alternative benchmark indicated by the competent authorities, including Central Banks, Working Group liable to manage the Benchmark Event or monetary authorities.
When selecting the alternative benchmark, the Bank will consider the following factors:
- compliance of the alternative benchmark with the requirements of the Benchmarks Regulation and suitability in measuring the underlying interest;
- presence on the register maintained by the European Securities and Markets Authority (“ESMA”) or provision of the benchmark by EU administrators approved by ESMA and listed in the register kept by ESMA;
- guidance and definitions provided by professional associations (e.g., ISDA, ICMA or LMA), where possible and appropriate;
- market practices, if any;
- ability to implement the replacement of existing indices by alternative ones without undue delay;
- compliance with the characteristics of existing instruments linked to the benchmarks to be replaced.