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
