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

    ESAs Issue Multiple Regulatory Updates for Financial Sector Entities

    The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.

    November 15, 2022 WebPage Regulatory News
    News

    FSB and NGFS Publish Initial Findings from Climate Scenario Analyses

    The Financial Stability Board (FSB) and the Network for Greening the Financial System (NGFS) published a joint report that outlines the initial findings from climate scenario analyses undertaken by financial authorities to assess climate-related financial risks.

    November 15, 2022 WebPage Regulatory News
    News

    FSB Issues Reports on NBFI and Liquidity in Government Bonds

    The Financial Stability Board (FSB) published a letter intended for the G20 leaders, highlighting the work that it will undertake under the Indian G20 Presidency in 2023 to strengthen resilience of the financial system.

    November 14, 2022 WebPage Regulatory News
    News

    ISSB Makes Announcements at COP27; IASB to Propose IFRS 9 Amendments

    The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.

    November 10, 2022 WebPage Regulatory News
    News

    IOSCO Prioritizes Green Disclosures, Greenwashing, and Carbon Markets

    The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.

    November 09, 2022 WebPage Regulatory News
    News

    EBA Finalizes Methodology for Stress Tests, Issues Other Updates

    The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups

    November 09, 2022 WebPage Regulatory News
    News

    EU Finalizes Rules Under Crowdfunding Service Providers Regulation

    The European Union has finalized and published, in the Official Journal of the European Union, a set of 13 Delegated and Implementing Regulations applicable to the European crowdfunding service providers.

    November 08, 2022 WebPage Regulatory News
    News

    OSFI Sets Out Work Priorities and Reporting Updates for Banks

    The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.

    November 07, 2022 WebPage Regulatory News
    News

    APRA Finalizes Changes to Capital Framework, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.

    November 03, 2022 WebPage Regulatory News
    News

    BIS Hub and Central Banks Conduct CBDC and DeFI Pilots

    The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.

    November 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8596