Press Conference by ASO Taro, Deputy Prime Minister, Minister of Finance, and Minister of State for Financial Services
(Friday, September ３, 2021, 11:06 am to 11:25 am)
[Questions and answers:]
Regarding Mizuho Bank’s system failures in August, the bank submitted a report based on the Banking Act to the FSA on August 31. What do you think about the report? What administrative disposition is in your mind at this point?
Regarding the system failures on August 20 and 23, it is true that Mizuho Bank submitted a report to the FSA the day before yesterday. I refrain from making any comments on an individual case, including the specific contents of the report and evaluations thereof. Anyway, based on the report submitted by Mizuho, we have to follow up the bank's efforts for responding to customers affected by the system failures, searching the causes of the failures and devising recurrence-prevention measures. You have been referring to the system failures only of Mizuho Bank, but there have been other cases, including Amazon's system failure, which involved SBI, and many other companies. That large-scale incident originated from a system failure at Amazon, I think. A failure or accident may occur in a large system, as it is a machine. Therefore, companies need to put in place backup systems in preparation for such possibilities, otherwise, users will suffer inconvenience. That incident occurred in the most profitable sector, and banks and other users of the system thought that proper measures should be taken to ensure services. This kind of incident may occur, and we all need to be prepared for the possibilities of a failure or accident.
Mizuho had system failures four times until this March and a third-party panel compiled a report in June. In the meantime, I think the FSA's inspection seems to have taken too much time. Of course, Mizuho should be blamed the most, but aren't there some problems with the FSA's responses to Mizuho? What do you think?
This bank had large-scale system failures twice from the very beginning—I do not know whether you were born at that time. Then, the bank has had large-scale system failures four times, this year. When a conclusion was to be made regarding system failures, a new problem arose. Those developments are regrettable. Steady follow-ups of these system failures are needed. It is not that the same kind of failures occur repeatedly, but causes of the failures differ each time, so we do not know them exactly. We have not only to hear the bank's explanations but to investigate further.
It is not an immediate issue, but I would like to ask you about Japanese yen LIBOR rates, whose permanent cessation is scheduled at the end of this year. In April, the Tokyo Term Risk Free Rate (TORF) was published and all alternative benchmarks are on the table. The FSA is offering support to financial institutions for a smooth transition from LIBOR in collaboration with the Bank of Japan, Japanese Bankers Association, and other relevant organizations and associations. On the other hand, according to the Summary of Survey Results on the Use of LIBOR published at the end of May, the outstanding contract amount was approximately 2,600 trillion yen as of the end of last year. If a smooth transition is not achieved by the deadline, there is a risk of major confusion. Japan's Transition Plan sets the end of this month as the deadline for noticeable reductions in existing contracts. Could you explain how you recognize the current situation at this point in time with only less than four months remaining until the end of this year and what the FSA should do specifically in the coming four months?
There may be few who know the term "Japanese yen LIBOR rates." LIBOR means the London interbank offered rate. Japanese yen LIBOR rates are rates for interbank transactions. As you know, it was four years ago when problems arose, right? When was it, how many years ago?
Manipulations were revealed one after another around the summer of 2012.
Multiple problems involving Japanese yen LIBOR rates were revealed and the permanent cessation of LIBOR was decided. Accordingly, we also need to create alternative benchmarks and are scheduled to abolish Japanese yen LIBOR rates, interbank unsecured rates, at the end of this year. As we do not have that much time left, we are asking market players of major financial institutions to prepare for the transition to alternative benchmarks in line with the Transition Plan, and we think that their efforts are progressing steadily. We still have four months until the year end, but we are currently focusing on making progress by the end of September. The Tokyo Term Risk Free Rate, or TORF, is often referred to, but there are also other alternatives, such as Tokyo Over-Night Average Rate, or TONA. We need to achieve a transition from LIBOR to those alternatives successfully without any major confusion. For that purpose, the FSA, in collaboration with the Bank of Japan and other organizations and associations, will conduct a survey concerning the progress by the end of September and will ask financial institutions, including regional banks, not limited to major banks, to take required measures. The outstanding amount of contracts referencing Japanese yen LIBOR rates is over 2,000 trillion yen, or even larger, 2,500 trillion or 2,600 trillion yen. The transition to alternative benchmarks is being made sequentially as the permanent cessation of LIBOR was announced earlier. This is a vital issue In that sense, efforts are being made steadily according to what I hear in progress reports. We think that banks are squarely facing this issue with the awareness of the possible risks if the transition is not achieved successfully by the end of this year.
- Laws & RegulationsPage list
- Name of Laws and Regulations(PDF)
- Financial Instruments and Exchange Act
- Recent Changes
- Public Comment
- No Action Letter System
- Procedures concerning Foreign Account Management Institutions
- PrinciplesPage list
- Strategic Directions and Priorities
- Progress and Assessment of the Strategic Directions and Priorities
- Policy Approaches to Strengthen Cyber Security in the Financial Sector
- Financial Monitoring Policy
- AnnouncementsPage list
- Press Conferences
- Press Releases
- Official Statements
- Great East Japan Earthquake-Related Information
- The Earthquake Centered in the Kumamoto Region of Kumamoto Prefecture 2016-Related Information
- List of Institutions
- For those engaging in High Speed Trading
- To Operators of Specially Permitted Businesses for Qualified Institutional Investors, etc.