Japanese Bankers Association

"Report on the Review of JBA TIBOR Administration" and Publication of "JBA TIBOR Code of Conduct"

We, the Japanese Bankers Association (Chairman: Takeshi Kunibe) ("JBA"), have been exploring measures to maintain and enhance the credibility of JBA TIBOR, in view of issues such as the manipulation of LIBOR and the subsequent international discussions, including those by the International Organization of Securities Commissions ("IOSCO"), on measures to enhance the credibility and transparency of financial benchmarks.

After publishing an interim report to outline the progress of its efforts in July, the JBA has continued its efforts in light of subsequent developments in international discussions, including IOSCO's "Principles for Financial Benchmarks ("IOSCO Principles")," and also national discussions on the role for financial benchmark regulations.

This is to announce that, based on such efforts to review the administration of TIBOR, the JBA has compiled a report to define specific measures. Further, the JBA has developed "JBA TIBOR Code of Conduct ("Code of Conduct")" which sets out the rules that reference banks should abide by as well as the processes that they should have in place in connection with the rate submission.

We will seek to maintain and enhance the credibility of JBA TIBOR by taking measures that are hereby announced, and are committed to strengthen the administration of TIBOR so that it will be internationally recognized as a benchmark that is in line with the IOSCO Principles and will continue to be widely used as a representative benchmark for Japanese yen interest rates.

The measures, which are hereby announced, are subject to changes, as necessary, in accordance with future developments in national legislation and other relevant matters.

Outline of the Review of the JBA TIBOR Administration

The JBA has reviewed the JBA TIBOR administration practices in the context of the IOSCO Principles, and has decided to take the following measures on "enhancement the governance system of the administrator," "enhancement the governance system of reference banks", and addressing other considerations.

(1) Enhancement of the Administrator's Governance System

To establish a more neutral administration framework, the JBA will newly form a legal entity which undertakes TIBOR calculation and publication, and will transfer its TIBOR calculation/publication operations to this entity.

The legal entity to be newly established ("New Administrator") will establish a governance system, which focuses on the fairness and transparency of benchmark administration, in line with the IOSCO Principles.

【Outline of New Administrator】
Name: JBA TIBOR Administrator (Provisional name)
Form of establishment: Ippan Shadan Hojin (General incorporated association)
Voting rights: Japanese Bankers Association to hold 100% of voting rights.
Timing of establishment: TBD (as soon as possible)

【Governance System of New Administrator】

  1. Organizational Structure
    The Board of Directors will be formed as a decision-making body of the New Administrator. The JBA TIBOR Oversight Committee (a provisional name) ("Oversight Committee"), which is mainly comprised of external experts, will be set up as its sub-committee. The Oversight Committee will have a high degree of independence, and provide the Board of Directors with recommendation that contributes to the appropriateness and transparency of benchmark administration.
    Further, other committees, such as the JBA TIBOR Administration Committee (a provisional name) which will undertake discussions on practical issues relating to benchmark administration, will be established under the Board of Directors, as well as an internal audit function and a necessary secretariat function.
  2. Development of Relevant Rules
    To ensure the appropriateness of benchmark administration operations, relevant rules including operational rules, will be developed. The operational rules will in principle be publicly disclosed on a website or by other means for the purpose of ensuring the transparency of benchmark administration.
  3. Implementation of External Audit
    From the perspective of ensuring the appropriateness of benchmark administration operations, the New Administrator will in principle be audited by external auditors or equivalent bodies on an annual basis. The audit results should be published on a website or by other means in principle.

(2) Enhancement of Reference Bank's Governance System

  1. Development of the Code of Conduct
    The "JBA TIBOR Publication Rules," which provide for TIBOR publication processes and other matters, will be replaced; and the Code of Conduct will be newly developed to set forth the rules that reference banks should abide by as well as processes that they should have in place in connection with rate submission.
  2. Administrator's Assessment on Compliance with the Code of Conduct
    The New Administrator will assess annually whether reference banks are implementing rate submissions appropriately in accordance with the Code of Conduct.
  3. Effective Date of the Code of Conduct
    TBD (as soon as possible)

(3) Others

  1. Reduction of the Number of Tenors
    The JBA has decided to reduce the number of maturities for which the Japanese Yen TIBOR and Euroyen TIBOR rates are published, from the current 13 maturities (i.e. 1 week and 1 to 12 months (each of which is hereinafter referred to as "tenor")) to six tenors (i.e 1 week, 1 month, 2 months, 3 months, 6 months and 12 months), discontinuing the publication of TIBOR for seven tenors (i.e. 4 months, 5 months, 7 months, 8 months, 9 months, 10 months and 11 months).
  2. Clarification of the Definition
    The terms used to define the JBA TIBOR will be clarified in the Code of Conduct. For example, the term a "prime bank" is defined as a "bank which is financially resilient (e.g. a bank having adequate capital and sufficient liquid assets) and which is a major player in the Japan unsecured call market (or in the Japan Offshore Market in the case of Euroyen TIBOR)."

Ogura/Aoki, Public Relations Division, Planning & Coordination Department