Japan’s Regulatory Requirements for Banks: A Comprehensive Overview

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The Financial Services Agency (FSA) of Japan has introduced various regulations and guidelines to ensure the stability and security of the country’s financial system. This article provides an overview of the key laws, regulations, and guidelines that banks in Japan must comply with.

Laws and Regulations

Japan’s banking sector is governed by a range of laws and regulations, including:

Financial Instruments and Exchange Act (FIEA): This law regulates the activities of financial institutions, including banks, securities firms, and insurance companies.
Banking Act: This law sets out the requirements for bank incorporation, licensing, and operations.

Recent Changes

The FSA has introduced several recent changes to its regulations and guidelines, including:

Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc.

These guidelines provide a framework for the supervision of financial institutions, including banks.

Guidelines for Creating, Recordkeeping and Reporting of Transaction Information specified in Article 4(1) of the Cabinet Office Order on the Regulation of Over-the-Counter Derivatives Transactions, etc.

These guidelines provide requirements for the creation, recordkeeping, and reporting of transaction information related to over-the-counter derivatives transactions.

Supervisory Guidelines and Policies

The FSA has established various supervisory guidelines and policies to ensure the stability and security of Japan’s financial system, including:

JFSA’s Supervisory Approaches - Replacing Checklists with Engagement

This policy aims to improve the effectiveness of supervision by moving away from checklist-based approaches and towards more engagement-oriented approaches.

Financial Monitoring Policy

This policy provides guidelines for the monitoring of financial institutions to identify potential risks and vulnerabilities.

Public Comment

The FSA invites public comments on proposed changes to its regulations and guidelines, including:

Comprehensive Supervisory Guidelines for Financial Instruments Business Operators, etc. regarding ESG Investment Trusts

The FSA has invited comments on proposed amendments to these guidelines related to environmental, social, and governance (ESG) investment trusts.

The FSA has invited comments on proposed guidelines for social bonds.

No-Action Letter System

The FSA’s No-Action Letter System allows financial institutions to request a letter from the FSA stating that it will not take enforcement action against them if they engage in certain activities or practices.