JFSA proposed a rule on operational risk capital requirements and finalized rules on liquidity and leverage ratio requirements under the Basel framework. Furthermore, as part of its response to the cessation of LIBOR, JFSA published questions and answers (Q&A) on applying transitional measures with respect to the OTC derivative transactions involving the legacy interest rate benchmarks that are being replaced with the alternative benchmark rates. Finally, JFSA also updated the list of key performance indicators, which it had set forth in September 2019 to reflect the efficiency of financial intermediation by financial institutions (including major banks and regional banks).
Getting back to the Basel III updates, JFSA proposed amendments to the regulatory notices on operational risk capital requirements, in line with the final Basel III framework. The proposal on Pillar 1 is aimed at abolishing the advanced measurement approach, the basic indicator approach, and the standardized approach, thus setting forth a new standardized measurement approach that measures the operational risk capital by "multiplying the Business Indicator Component (BIC) by the Internal Loss Multiplier." Additionally, the proposal on Pillar 3 sets forth certain new disclosure items. The comment period on this proposal is open till April 30, 2021.
Another Basel update involves the publication of the final amendments to the regulatory notices and guidelines related to liquidity ratio requirements (Pillar 1 and Pillar 3) for internationally active banks, along with the Q&A on liquidity ratio requirements. The amendments are with respect to the net stable funding ratio (NSFR) requirements from BCBS. JFSA had consulted on these amendments from December 2020 to January 2021 and has now published a summary of the comments received on the consultation. These amendments will take effect from September 30, 2021.
JFSA also finalized amendments to the regulatory notice related to leverage ratio requirements; these amendments extend the measures to exclude central bank reserves from the calculation of leverage ratio until the end of March 2022, due to the continuous uncertainty regarding the impact of COVID-19 pandemic. The amendments came into effect on March 31, 2021. JFSA had consulted on these amendments from February to March 2021 and received no comments on the consultation.
Comment Due Date: April 30, 2021
Effective Date: September 30, 2021/March 31, 2021
Keywords: Asia Pacific, Japan, Banking, Basel, Operational Risk, Regulatory Capital, Leverage Ratio, Pillar 1, Pillar 3, NSFR, Standardized Approach, OTC Derivatives, Q&A, Liquidity Risk, Benchmark Reforms, Financial Intermediation, JFSA
Previous ArticleGHOS Endorses Strategic Priorities and Work Program of BCBS
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.