BOJ Consults on Treatment of Tough Legacy Contracts in Japan
The Cross-Industry Committee on Japanese Yen (JPY) Interest Rate Benchmarks of the Bank of Japan (BOJ) released a consultation on the treatment of tough legacy contracts in Japan. The consultation aims to summarize the to-date results of discussions at the Committee on legacy contracts that cannot feasibly be transitioned away from JPY LIBOR (tough legacy contracts) and to solicit comments from a wide range of market participants. The consultation seeks views on contracts that fall under the category of tough legacy contracts and for which the use of synthetic yen LIBOR may be considered. It also seeks views on matters that contracting parties should keep in mind when considering the use of synthetic yen LIBOR. The consultation is open for comments until October 19, 2021.
The subject of consideration in this consultation is existing contracts for loans and bonds that reference JPY LIBOR under the governing Japanese law. Based on the opinions received in response to this consultation, the Committee plans to publish the results of the consultation in November 2021. Additionally, at the Monetary Policy Meeting held in September 2021, the Policy Board of BOJ made the following decisions to support the private-sector efforts on climate change:
- BOJ shall establish the "Principal Terms and Conditions of the Funds-Supplying Operations to Support Financing for Climate Change Responses"
- BOJ shall amend the "Principal Terms and Conditions of Complementary Deposit Facility"
- BOJ shall amend the "Principal Terms and Conditions of the Interest Scheme to Promote Lending"
Keywords: Asia Pacific, Japan, Banking, LIBOR, Interest Rate Benchmarks, Legacy Contracts, Climate Change Risk, Credit Risk, Lending, BOJ
Featured Experts
Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Previous Article
BIS Report Highlights Potential of Multi-CBDC Platform PrototypeRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.