The Financial Services Agency's "Comprehensive Guidelines for Supervision of Major Banks, etc." list, as a point of focus in explaining derivatives trades, an explanation of the estimated maximum loss under a worst-case scenario, including the possibility that the loss could grow further if conditions differ from the assumptions. For a trade that triggers a termination payment on early termination, the institution also explains the estimated termination payment under the worst-case scenario and, if the payment could exceed the estimate, that fact1.

Consider a hypothetical example in which an FX forward buys USD 1 million at 140 yen per dollar and the worst-case scenario is 100 yen per dollar. The loss compared with buying at spot is (140 − 100) × USD 1 million = 40 million yen. At 170 yen per dollar, the result is instead a gain of 30 million yen. If a dollar payment is scheduled and the forward is used to make it, the payment is fixed at 140 million yen in either case.

The "Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc." use two forms of the term, "最悪のシナリオ" and "最悪シナリオ"2. The loss the client can tolerate may be exceeded before the worst-case scenario is reached, and in that case the institution explains that as well1.

Notes

  1. Financial Services Agency, "主要行等向けの総合的な監督指針" (Comprehensive Guidelines for Supervision of Major Banks, etc.) (October 2026), III-3-3-1-2(2)①イ, items a and b (pages 217–218) (in Japanese). ↩ ↩2

  2. Financial Services Agency, "金融商品取引業者等向けの総合的な監督指針" (Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc.) (October 2026), IV-3-3-2(6)①イ and ロ, and ②ロ (page 165) (in Japanese). ↩