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 Edwards
James leads the initiative to model the risk implications of climate change for corporates, SMEs, and sovereigns.
Previous Article
BIS Report Highlights Potential of Multi-CBDC Platform PrototypeRelated Articles
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
SEC Extends Comment Period on Climate Risk Disclosures
The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.
APRA Reduces Committed Liquidity Facility, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.
CMF Consults on Basel Rules, Presents Roadmap to Address Climate Risks
The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.
PRA Issues Statement on NPEs and Policy on Trading Activity Wind-Down
The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.
EBA Updates Standards for 2023 Benchmarking of Internal Approaches
The European Banking Authority (EBA) updated the implementing technical standards that specify the data collection for the 2023 supervisory benchmarking exercise in relation to the internal approaches used in market risk, credit risk, and IFRS 9 accounting.
EIOPA Responds to Stakeholder Views on Blockchain in Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.
