Fallback plans in connection with benchmarks
A benchmark is an index by which the amount payable under a financial instrument or financial contract, or the value of a financial instrument is determined. A benchmark can also be an index that is used to measure the performance of an investment for the purpose of tracking the return of the index, defining asset allocation of a portfolio or calculating performance fees.
Trusted Novus Bank uses benchmarks in connection with certain of the products and services which it provides (e.g. the use of LIBOR in the calculation of certain loan and deposit interest rates, or in connection with a derivative transaction such as an interest rate swap).
The implication of changes to benchmarks
Even though most benchmarks have a long life span, changes to legislation, regulation, market trends etc. can at times cause major benchmarks to change significantly or cease to exist altogether and be replaced by an alternative.
- If you enjoy a product or service, or are party to a contract that is impacted by these changes in the future, then Trusted Novus Bank Ltd. will establish a new benchmark rate based on other official reference rates applicable for the same period.
- In some cases, your agreement with us may already designate an alternative reference rate, in which case such agreement will apply to you.
Establishing a new benchmark
As benchmarks are used in connection with transactions in the interbank market as well as between banks and their clients, it is Trusted Novus Bank’s intention that its fallback plan should reflect the market practice accepted at an international level.
On an ongoing basis, Trusted Novus Bank follows the international work on reference rates. As new reference rates are defined and become standard practices in the market, Trusted Novus Bank will adopt them as new benchmarks.
If a benchmark changes materially or ceases to exist before an alternative is established and generally accepted, the bank will determine a provisional corresponding reference rate or a representative rate until a new standard practice has been defined by the financial markets.