Featured Product

    BOJ Deputy Governor Speaks on Interest Rate Benchmark Reform in Japan

    February 19, 2020

    The Deputy Governor of BOJ Masayoshi Amamiya spoke in Tokyo about how Japan should proceed with interest rate benchmark reform over the next two years until the end of 2021, when the discontinuation of LIBOR is expected. He focused on initiatives by individual companies, initiatives by the entire market, and the role of the public sector in Japan.

    Mr. Amamiya mentioned that the users of interest rate benchmarks, such as financial institutions, institutional investors, and non-financial corporates, are required to change their LIBOR-based operations and organizational structures to a framework based on alternative benchmarks. It is necessary to not only simply examine the exposure of LIBOR-based transactions but also how LIBOR is used in various areas, including accounting and risk management. In addition, it will be required to establish a governance framework, including specific section focusing on the transition to alternative benchmarks, and secure internal resources, including staff and budgets, while the extent of the preparation may differ from one institution to another.

    He highlighted that it is important to promote market-wide initiatives, including the establishment of alternative benchmarks to LIBOR and the development of market practices, to encourage individual actions by market participants and interest rate benchmark users. For the Japanese yen, there is a great deal of support for the term reference rate to be used as an alternative benchmark to JPY LIBOR. As a first step, the entity is going to start publishing "prototype rates," which do not presume use in actual transactions. Through the publication of prototype rates, it is expected that the entire market will transition smoothly from JPY LIBOR to the term reference rate, as individual steps are taken to prepare for transactions using that alternative benchmark. Following that, the aim is to publish "production rates" of the term reference rate no later than mid-2021, with an assumption that these will be used in actual transactions.

    The Deputy Governor said that in relation to the initiatives by individual companies and the entire market, it is important for the public sector to have the perspective of ensuring the formation of fair prices and the stability of financial transactions in financial markets, both before and after the discontinuation of LIBOR. It is very important for both the private and public sectors to keep in mind the timeline of when the discontinuation of LIBOR is expected—that is, up to the end of 2021. To accomplish the interest rate benchmark reform by also utilizing the results of past deliberations, it is necessary for all relevant parties in the private and public sectors to steadily implement measures while appropriately cooperating with each other by keeping in mind the limited time until the end of 2021.

     

    Related Link: Speech

     

    Keywords: Asia Pacific, Japan, Banking, Securities, Interest Rate Benchmarks, LIBOR, Benchmark Reforms, IBOR Reform, BOJ, BIS

    Featured Experts
    Related Articles
    News

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    News

    EBA Publishes Report on Asset Encumbrance of Banks in EU

    EBA published the annual report on asset encumbrance of banks in EU.

    January 18, 2021 WebPage Regulatory News
    News

    US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C

    FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.

    January 15, 2021 WebPage Regulatory News
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    News

    EBA Issues Erratum for Technical Package on Reporting Framework 3.0

    EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.

    January 14, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets

    APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.

    January 14, 2021 WebPage Regulatory News
    News

    ECB Letter Sets Out Strategies to Address Issue of Nonperforming Loans

    ECB published a letter from Andrea Enria, the Chair of the Supervisory Board of ECB, answering questions raised by the President of the Bundestag (the German federal parliament) on how ECB assesses the financial stability of the euro area in the context of the significant level of nonperforming loans.

    January 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6450