Featured Product

    BOJ and JFSA Write to Financial Institutions on LIBOR Transition

    June 01, 2020

    BOJ, together with JFSA, has written to the CEOs of major financial institutions regarding LIBOR transition. The letter is intended to urge financial institutions to take actions for permanent cessation of LIBOR at the end of 2021. The letter also requests submission of relevant materials, by July 10, 2020, for review of the progress of preparedness of individual firms. Although the letter has been sent to some financial institutions, preparedness of other financial institutions will also be monitored based on the contents of the letter. Any financial institution using LIBOR is expected to accelerate its actions by responsible and active involvement of management officials with due consideration for description of the letter.

    The letter details that the following would be considered as actions generally required for the financial institutions:

    • The plan regarding actions for “transition” or “fallback” for products and transactions referencing LIBOR has already been developed, including schedule. The board of directors or management has already approved the transition plan. The board of directors or management receives regular updates on progress of the transition plan and provide necessary directions on the actions of the plan.
    • Robust fallback provisions should be inserted in new contracts and products referencing LIBOR with a maturity beyond the end of 2021. Transition to alternative rates or introduction of fallback provisions should be made as soon as possible in existing contracts and products referencing LIBOR with a maturity beyond the end of 2021. Target for termination of new issuance and contracts of LIBOR-referenced cash products (loans and bonds) maturing beyond the end of 2021 has been set.
    • New products referencing risk-free rates should be available in the IT systems by early 2021. If products or transactions could not be available in the IT systems (in a case of part of procedure not to be supported by the IT system), operational rules and procedures should be reviewed to be able to provide new products referencing risk-free rates manually by the end of 2020. 

    The letter requests financial institutions to submit relevant materials approved by the board of directors or management, covering the following elements:

    • Governance framework for LIBOR cessation issues
    • Range of potential impact arising from permanent cessation of LIBOR, including specific name of IT systems, operational rules and procedures
    • Contents of the transition plan, including schedule
    • Framework for the management to oversee development and progress on the transition plan, and status of ensuring the effectiveness of the framework
    • Status of securing and allocating resources (personnel and budget), based on the results of “Joint Survey on the Use of LIBOR” conducted by JFSA and BOJ in October 2019, and arrangements for flexible allocation of resources along the progress of the implementation timeline
    • Status of identifying and evaluating conduct risks arising from transition or fallback and measures to mitigate these conduct risks
    • Policy of preparation for unexpected termination of LIBOR-referenced transactions ahead of the schedule due to the decline of market liquidity in the products and transactions referencing LIBOR
    • Disclosure policy in financial statements and investor relationships

    Keywords: Asia Pacific, Japan, Banking, Securities, LIBOR, Interest Rate Benchmark, Risk-Free Rates, Governance, Benchmark Reforms, BOJ, JFSA

    Related Articles

    EBA Finalizes Remuneration Standards for Investment Firms in EU

    EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).

    January 21, 2021 WebPage Regulatory News

    ECA Recommends Actions to Enhance Resolution Planning for Banks

    EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.

    January 20, 2021 WebPage Regulatory News

    BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK

    BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.

    January 20, 2021 WebPage Regulatory News

    PRA Proposes Rules on Identity Verification of Depositor Protection

    PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).

    January 20, 2021 WebPage Regulatory News

    FSB Publishes Work Program for 2021

    FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.

    January 20, 2021 WebPage Regulatory News

    FCA Issues Update on Move to New Data Collection Platform

    FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.

    January 20, 2021 WebPage Regulatory News

    Bundesbank Publishes Derivation Rules for Reporting by Banks

    Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.

    January 19, 2021 WebPage Regulatory News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News

    ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020

    ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.

    January 19, 2021 WebPage Regulatory 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
    RESULTS 1 - 10 OF 6484