JFSA Survey Indicates More Preparations Required for LIBOR Transition
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
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
