Firstly, as lender of last resort, the central bank had to be in a position to monitor the insolvency and liquidity status of banks. This was also necessary for it to secure the stability of the payment and settlement system. Therefore it was essential for the BOK to keep bank supervisory function.
Given ISDA’s work to implement more robust fallbacks for derivatives that reference key interbank offered rates, I will focus on the role of fallbacks for EURIBOR. EURIBOR plays an important role in the transmission of the ECB’s monetary policy. It is closely linked to the interest rates that affect many businesses and households in the euro area.