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.
Previous Article
BIS Report Highlights Potential of Multi-CBDC Platform PrototypeRelated Articles
EBA Launches Stress Tests for Banks, Issues Other Updates
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
