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High Level Contingency plans as per article 28 (2) of BMR in case of Benchmark change or cessation of publication

As a supervised entity and a user of benchmarks, and in order to comply with Article 28 (2) of the European Benchmarks Regulation (BMR)[1], Crédit Agricole Serbia (CAS), as an entity of Crédit Agricole Group (CAG), has produced and will keep maintaining robust written plans[2] describing the detailed actions to be undertaken in the event that an index it uses:

  • materially changes (for instance in the event where a benchmark administrator took the decision to implement a new methodology resulting in a substantive change of the underlying interest the benchmark is trying to measure);  
  • ceases to exist or to be published by its administrator (temporary or permanently);
  • is not authorized (i.e. as per the BMR not included in the register of the European Securities and Markets Authority): 
  • before 01/01/2020 for non-critical benchmarks administrated by an EEA benchmark administrator
  • before 01/01/2022 for critical benchmarks and third-country (i.e. non-EEA) administrated benchmarks;
  • is removed from the list of authorized administrators and benchmarks (i.e. ESMA register).

In its contingency plans, CAS defined the set of contingencies and occurrence scenarios in order to anticipate the most appropriate response to each of the situations analyzed. These contingency plans were designed to cover two different levels of consideration:

  1. According to the discontinuity of the index, distinction is made between:
  • Temporary discontinuity;
  • Permanent discontinuity.
  1. In accordance with the fact whether or not the event date is known in advance, there are defined:
  • An emergency plan in case a benchmark is suddenly no longer available (i.e. stops being published or made available to the public) or an administrator/calculation agent suddenly stops to administrate / calculate one of its benchmarks;
  • A medium/long-term plan preparing a transition roadmap when the modification, change or cessation of a benchmark is known well in advance, with sufficient time for the preparation.

These plans describe how CAS is monitoring such potential events in order for it to launch these plans as soon as an event occurs and is identified.

In addition, a list of important actions to be taken was also created in these plans and it includes the following points:

  • Mapping of exposures and contracts on the event date to identify activities, type of clients and typology of contracts concerned, with the objective to evaluate (qualitatively and quantitatively) the event impact on activity and accurately identify transactions and clients impacted;
  • Assessment of the risk and financial consequences;
  • Definition of the highest priorities (major exposures and the most sensitive clients);
  • Communication, proposition and agreement with the clients on the sustainable benchmark alternative, in accordance with the fallback clause;
  • Activation of operational and IT procedures (deals evaluation, interest calculation, issue of confirmations, migration or termination of existing deals).

Responsibilities and obligations at each stage of the occurred event, as well as an escalation process were also put in place to describe the participation by various departments and functions of CAS (impacted business lines, compliance and support functions) to handle and take part in these plans as quickly and effectively as possible. 

CAS is internally maintaining, reviewing periodically (at least annually) and updating, when necessary, detailed and robust written contingency plans.

This publication only provides general information regarding these potential issues and regulatory obligations.

This publication and internal plans may also be subject to updates without prior notice and especially in case where the regulations change or any other cases where modifications will need to be considered.

 

[1] “Supervised entities other than an administrator as referred to in paragraph 1 that use a benchmark shall produce and maintain robust written plans setting out the actions that they would take in the event that a benchmark materially changes or ceases to be provided. Where feasible and appropriate, such plans shall nominate one or several alternative benchmarks that could be referenced to substitute the benchmarks no longer provided, indicating why such benchmarks would be suitable alternatives. The supervised entities shall, upon request, provide the relevant competent authority with those plans and any updates and shall reflect them in the contractual relationship with clients

[1] European Securities and Market Authority (ESMA) considers that written plans are robust if they determine operational procedures in writing and if they include detailed courses of action, relevant communication channels and arrangements for different scenarios and contingencies. Written plans should be thorough and adequate. They should reflect the nature and size of the individual benchmark and the scale of its use in the markets. ESMA further considers that maintaining the robust written plans requires supervised entities to continuously monitor relevant factors and update arrangements as appropriate.

 

[1]Supervised entities other than an administrator as referred to in paragraph 1 that use a benchmark shall produce and maintain robust written plans setting out the actions that they would take in the event that a benchmark materially changes or ceases to be provided. Where feasible and appropriate, such plans shall nominate one or several alternative benchmarks that could be referenced to substitute the benchmarks no longer provided, indicating why such benchmarks would be suitable alternatives. The supervised entities shall, upon request, provide the relevant competent authority with those plans and any updates and shall reflect them in the contractual relationship with clients

[2] European Securities and Market Authority (ESMA) considers that written plans are robust if they determine operational procedures in writing and if they include detailed courses of action, relevant communication channels and arrangements for different scenarios and contingencies. Written plans should be thorough and adequate. They should reflect the nature and size of the individual benchmark and the scale of its use in the markets. ESMA further considers that maintaining the robust written plans requires supervised entities to continuously monitor relevant factors and update arrangements as appropriate.

 

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