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

    APRA Publishes Results of Climate Risk Self-Assessment Survey

    The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.

    August 04, 2022 WebPage Regulatory News
    News

    ACPR Publishes Updates Related to CRD IV and Covered Bonds

    The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).

    August 03, 2022 WebPage Regulatory News
    News

    BIS Paper Contributes to Debate on Regulating NBFIs and Big Techs

    The Financial Stability Institute (FSI) of the Bank for International Settlements recently published a paper proposing a framework for classifying financial stability regulation as either entity-based or activity-based.

    August 03, 2022 WebPage Regulatory News
    News

    EIOPA Publishes Guidance on Climate Change Scenarios in ORSA

    The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).

    August 02, 2022 WebPage Regulatory News
    News

    EBA and ECB Respond to Proposals on Sustainability Disclosures

    The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.

    August 01, 2022 WebPage Regulatory News
    News

    BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks

    A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.

    July 29, 2022 WebPage Regulatory News
    News

    EBA Publishes Multiple Regulatory Updates for Regulated Entities

    The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.

    July 29, 2022 WebPage Regulatory News
    News

    EIOPA Issues SII Taxonomy and Guide on Sustainability Preferences

    The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.

    July 29, 2022 WebPage Regulatory News
    News

    EESC Opines on Proposals on CRR and European Single Access Point

    The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).

    July 29, 2022 WebPage Regulatory News
    News

    HM Treasury Publishes Multiple Regulatory Updates in July 2022

    HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.

    July 29, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8423