Featured Product

    BOJ and JFSA Respond to IBA and FCA Announcements on LIBOR Cessation

    March 08, 2021

    BOJ and JFSA published a response to the IBA announcement on the end date of LIBOR panel publication and the FCA announcement on the intention to consult on the publication of synthetic JPY LIBOR. In their response, BOJ and JFSA have specified the actions needed toward the end of 2021 when panel-based LIBOR will cease, in addition to setting out their expectations with respect to the synthetic JPY LIBOR.

    In principle, either active conversion to alternative reference rates or insertion of fallback language is necessary for legacy contracts referencing LIBOR in preparation for the permanent cessation of LIBOR. On March 05, 2021, IBA notified that panel-based LIBOR will cease at the end of 2021, except for certain USD LIBOR settings. According to the response statement, it is important that each financial institution should proceed to explain to its customers and amend contracts to progress either active conversion or insertion of fallback language as soon as practicable, in conformity with the “Roadmap to prepare for the discontinuation of LIBOR” released by the Cross-Industry Committee on JPY Interest Rate Benchmarks in August 2020 as well as the transition plan of each financial institution.

    While FCA has announced that it will consult on using the proposed new powers to require publication of synthetic JPY LIBOR for one additional year after the end of 2021, the Financial Services Bill introduced to the UK Parliament in October 2020 has not yet been enacted. Even if the Bill is enacted, in the UK, as expected, FCA could only compel IBA to publish a synthetic LIBOR for a limited period of time and its use will be restricted to legacy contracts that cannot feasibly be transitioned away from LIBOR. Therefore, it is of utmost importance that preparations toward the transition away from LIBOR continue without reliance on synthetic LIBOR. Continuous efforts are necessary to cease the issuance of new loans and bonds referencing JPY LIBOR by the end of June 2021 and to significantly reduce the amount of loans and bonds referencing JPY LIBOR by the end of September 2021. While it is premature to consider the use of synthetic JPY LIBOR at the moment, the following are the expectations of BOJ and JFSA with respect to the potential publication of synthetic JPY LIBOR:

    • Use of synthetic JPY LIBOR in new contracts and transactions. It is of utmost importance to steadily reduce the amount of contracts referencing JPY LIBOR to advance orderly transition away from JPY LIBOR, even if synthetic JPY LIBOR can be a “safety net.” Any synthetic JPY LIBOR should not be used in new contracts and transactions.
    • Use of synthetic JPY LIBOR in legacy contracts and transactions. In Japan, synthetic JPY LIBOR should be considered as a potential “safety net” and used only for legacy contracts that cannot feasibly be transitioned away from JPY LIBOR. The Cross-Industry Committee, in close cooperation with a wide range of market participants, intends to discuss the risks and uncertainties with a view to considering the nature of potential tough legacy that cannot be transitioned away from JPY LIBOR before the end of 2021.

    Keywords: Asia Pacific, Japan, Banking, Securities, LIBOR, Interest Rate Benchmarks, Benchmark Reforms, Basel, LIBOR Transition, Synthetic LIBOR, IBA, FCA, BOJ, JFSA

    Featured Experts
    Related Articles
    News

    EC Issues Regulation on Adjustments to K-Factor Coefficients Under IFR

    The European Commission (EC) published a report summarizing responses to the targeted consultation on the supervisory convergence and the single rulebook in the European Union (EU).

    January 20, 2022 WebPage Regulatory News
    News

    OSFI Issues Results of Pilot on Climate Risk Scenario Analysis

    The Office of the Superintendent of Financial Institutions (OSFI) published an update on the discussion paper that intended to engage federally regulated financial institutions and other interested stakeholders in a dialog with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.

    January 20, 2022 WebPage Regulatory News
    News

    ECB Issues Opinions on Green Bonds Standard and CRR Proposals

    The European Central Bank (ECB) published its opinion on a proposal for a regulation on European green bonds, following a request from the European Parliament.

    January 19, 2022 WebPage Regulatory News
    News

    ESRB Explores Policy Response to Risks Arising from Digitalization

    The Advisory Scientific Committee (ASC) of the European Systemic Risk Board (ESRB) published a report that explores the expected impact of digitalization on provision of financial and banking services, and proposes policy measures to address the risks stemming from digitalization.

    January 18, 2022 WebPage Regulatory News
    News

    EU Authorities Address COVID-19 Reporting, MCD, and PSD2 Issues

    The European Banking Authority (EBA) announced that the guidelines on the reporting and disclosure of exposures subject to measures COVID-relief measures shall continue to apply until further notice.

    January 17, 2022 WebPage Regulatory News
    News

    FI Publishes Multiple Regulatory and Reporting Updates

    The Swedish Financial Supervisory Authority (FI) announced that the capital adequacy reporting as at December 31, 2021 must be done by February 11, 2022.

    January 17, 2022 WebPage Regulatory News
    News

    BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance

    The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.

    January 16, 2022 WebPage Regulatory News
    News

    US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint

    The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.

    January 13, 2022 WebPage Regulatory News
    News

    EBA Issues Guide on Bank Resolvability, Consults on Transferability

    The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).

    January 13, 2022 WebPage Regulatory News
    News

    MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.

    January 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7875