Aggregated News From Investment Management Regulators

Preparation for permanent cessation of LIBOR

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Whereas reforming interest rate benchmarks have been developed in Japan and abroad, the possibility that the London Interbank Offered Rate (LIBOR) will be permanently discontinued after the end of 2021 has been increasing. While LIBOR is mainly referenced in derivative contracts such as interest rate swaps, it is also quoted in a significant number of cash products including corporate loans and bonds. Additionally, it is used in wide range of users, including not only financial institutions but also non-financial corporate and institutional investors. In this regard, there is the possibility of disruption to users if LIBOR were ceased without sufficient preparation.
Through close cooperation with the Bank of Japan and other relevant institutions, the Financial Services Agency of Japan (JFSA) will publish or provide links to related materials to help market participants, including financial institutions and non-financial corporate and institutional investors better understand the necessity of taking actions in preparation for the cessation of LIBOR, and also support market-led initiatives for a smooth transition away from LIBOR.

- Information will be updated accordingly -

Letters to the CEOs of Major Financial Institutions regarding LIBOR Transition

Financial Services Agency of Japan, together with the Bank of Japan, has written to the CEOs of major financial institutions regarding LIBOR transition. The purpose of sending the letters is to urge financial institutions to take actions for permanent cessation of LIBOR and to request submission of relevant materials to review the progress of preparedness in individual firms.
As mentioned above, the letters have been sent to some financial institutions. However, we will monitor preparedness of other financial institutions based on the contents of the letters.
Any financial institutions using LIBOR are expected to accelerate their actions by responsible and active involvement of management officials with due consideration for description of the letters.

“Taking Actions for Permanent Cessation of LIBOR” (JFSA and Bank of Japan) – June 1, 2020

Joint Survey on the Use of LIBOR (JFSA and Bank of Japan)

The JFSA, together with the Bank of Japan, is conducting a joint survey of financial institutions, including banks, securities companies and insurance companies, about their quantitative LIBOR exposures and their qualitative LIBOR transition progress. The aim of this survey is to allow supervisory authorities to identify financial institutions’ quantification of LIBOR exposure and the number of contracts referencing LIBOR as well as financial institutions’ progress toward transitioning away from LIBOR to alternative reference rates and their internal preparedness for this transition. We expect this publication will further promote the transition measures taken by each financial institution in a timely and smoothly manner. This survey is planned to be conducted regularly to follow up the progress and status of LIBOR transition.

Summary of Survey Results on the Use of LIBOR and Main Actions Needed (JFSA and Bank of Japan)
– March 13, 2020

Information from JFSA

Speeches

Keynote Speech, ISHIMURA Kozo, Director of the Risk Analysis Division, Strategy Development and Management Bureau (available in Japanese) – September 18, 2020, At ISDA Virtual Conferences “Bencmark Strategies Forum Japan”, Tokyo

Keynote Speech, HORIMOTO Yoshio, Deputy Director-General of the Strategy Development and Management Bureau (available in Japanese) – September 8, 2020, At QUICK Forum “What will become of the post-LIBOR world” , Tokyo

“Preparation for permanent cessation of LIBOR”, NAKAJIMA Junichi, Director-General of the Strategy Development and Management Bureau (available in Japanese) – September 1, 2020, At the Sub-Committee on Capital Markets, Committee on Financial and Capital Markets, Keidanren (Japan Business Federation) Meeting, Tokyo

“How Financial Institutions should act for LIBOR cessation”, MORITA Tokio, Director-General of the Strategy Development and Management Bureau (available in Japanese) – January 24, 2020, At Friday Regular Meeting of Kinzai Institute for Financial Affairs, Inc, Tokyo

Keynote Speech “Challenges and Approaches on LIBOR cessation issue”, ISHIMURA Kozo, Director of the Risk Analysis Division, Strategy Development and Management Bureau (available in Japanese) – November 7, 2019, At PwC Japan Seminar, Tokyo

Opening Remarks “Main Points of the Public Consultation and Overview of Deliberations on Interest Rate Benchmark Reform in Japan and Abroad”, MORITA Tokio, Director-General of the Strategy Development and Management Bureau (available in Japanese)
Summary points
– August 1 2019, At Interest Rate Benchmark Reform Forum in Bank of Japan, Tokyo

Meetings with Industry Associations

Japan Financial Services Association (available in Japanese) – May, 2020

Japan Securities Dealers Association (available in Japanese) – April, 2020

Major Banks/ Regional Banks Association of Japan/ Second Association of Regional Banks (available in Japanese) – March, 2020

Major Banks/ The Life Insurance Association of Japan/ The General Insurance Association of Japan (available in Japanese) – February, 2020

Major Banks/ Regional Banks Association of Japan/ Second Association of Regional Banks/ Japan Securities Dealers Association (available in Japanese) – January, 2020

The National Association of Shinkin Banks/ National Central Society of Credit Cooperatives/ Trust Companies Association of Japan/ National Association of Labour Banks (available in Japanese) – November, 2019

Regional Banks Association of Japan/ Second Association of Regional Banks/ Japan Securities Dealers Association/ The Life Insurance Association of Japan/ The General Insurance Association of Japan (available in Japanese) – September, 2019

Major Banks (available in Japanese) – August 2, 2019

Staff Reports

“Financial Institutions’ Preparedness for LIBOR Cessation and Future Actions with a Focus on the Results of the Joint Survey by the Financial Services Agency and the Bank of Japan”, Bank of Japan Review – August 11, 2020

“Interest Rate Benchmark Reform in Japan”, Accounting Standards & Disclosure Quarterly vol.68 (available in Japanese) – March 19, 2020

“Progress of reforming major interest rate benchmarks and future expectation”, Kinzai Financial Weekly (available in Japanese) – January 15, 2018

Other Links

Bank of Japan

Interest Rate Benchmark Reform (Preparedness for the Discontinuation of LIBOR)
Cross-Industry Committee on Japanese Yen Interest Rate Benchmarks
Statement regarding Calculation and Publication of Prototype Rates for Term Reference Rates

Japanese Bankers Association

LIBOR Special Page

Contact Details

Risk Analysis Division, Strategy Development and Management Bureau

Source link

Regulator Information

Abbreviation: FSA
Jurisdiction: Japan

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