Featured Product

    JFSA Survey Indicates More Preparations Required for LIBOR Transition

    March 19, 2020

    JFSA presented the results of a joint survey it conducted with BOJ on the quantitative London Inter-bank Offered Rate (LIBOR) exposures and the qualitative LIBOR transition progress. The survey was conducted on 278 financial institutions, including banks, securities companies, and insurance companies. The survey results highlight that, since the LIBOR transition requires comprehensive actions, specific preparations are needed with responsible and active involvement of management officials. As the next steps, JFSA and BOJ will monitor whether financial institutions take necessary actions in view of the time limit of end-2021. To this end, the two entities will deliberate on the need to set more specific core targets and conduct on-site monitoring, taking into account the progress in financial institutions’ preparations for LIBOR transition.

    As per the assessment, the key actions needed are as follows: 

    • Financial institutions with a large number of contracts maturing beyond end-2021 with no fallback provisions should press ahead with necessary actions for customers given the limited time available. They need to promptly set policies on new products referencing risk-free rat and on new contracts referencing LIBOR, so that the number of contracts referencing LIBOR will not increase.
    • Financial institutions with a larger number of contracts need to strengthen coordination among customer services, back office, and legal sections as they may incur more costs on those sections than anticipated. Even if they have fallback provisions, if they take the “amendment approach,” they need to prepare for scenarios where a number of consultations with customers can arise at one time.
    • Financial institutions that have not identified IT systems requiring upgrades need to do so promptly. Considering the time required to complete such upgrades, they need to prioritize which systems to upgrade first, clarify the schedule, and secure sufficient budgets for such upgrades.
    • Financial institutions that have issued bonds referencing LIBOR must take procedures according to the applicable laws of each jurisdiction to revise contractual terms; in principle, they need to host bondholders’ meetings for those issued in Japan, based on the Companies Act.
    • If financial institutions use LIBOR for their asset-liability management and other risk management, they need to consider reviewing their management framework.
    • Financial institutions need to identify issues and concerns associated with accounting and discuss them with outside auditors.

    The two-fold aim of this survey is to allow supervisory authorities to identify the financial institutions’ quantification of LIBOR exposure (the number of contracts referencing LIBOR), these institutions' progress toward transition from LIBOR to alternative reference rates, and their internal preparedness for this transition. The survey is planned to be conducted regularly to follow up the progress and status of LIBOR  transition. 

     

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

    Related Articles
    News

    EBA Updates List of Validation Rules for Reporting by Banks

    EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.

    September 10, 2020 WebPage Regulatory News
    News

    EBA Responds to EC Call for Advice to Strengthen AML/CFT Framework

    EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).

    September 10, 2020 WebPage Regulatory News
    News

    NGFS Advocates Environmental Risk Analysis for Financial Sector

    NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.

    September 10, 2020 WebPage Regulatory News
    News

    MAS Issues Guidelines to Promote Senior Management Accountability

    MAS published the guidelines on individual accountability and conduct at financial institutions.

    September 10, 2020 WebPage Regulatory News
    News

    APRA Formalizes Capital Treatment and Reporting of COVID-19 Loans

    APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.

    September 09, 2020 WebPage Regulatory News
    News

    SRB Chair Discusses Path to Harmonized Liquidation Regime for Banks

    SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.

    September 09, 2020 WebPage Regulatory News
    News

    FSB Workshop Discusses Preliminary Findings of Too-Big-To-Fail Reforms

    FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.

    September 09, 2020 WebPage Regulatory News
    News

    ECB Updates List of Supervised Entities in EU in September 2020

    ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.

    September 08, 2020 WebPage Regulatory News
    News

    OSFI Identifies Focus Areas to Strengthen Third-Party Risk Management

    OSFI published the key findings of a study on third-party risk management.

    September 08, 2020 WebPage Regulatory News
    News

    FSB Extends Implementation Timeline for Framework on SFTs

    FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.

    September 07, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5796