Aug 13 2007 Nathan Lynch in Sydney
The Japanese Financial Services Agency has announced plans to step up its supervision of firms in the coming year as the industry prepares for a raft of new regulations. The regulator said that it would hold meetings with senior officials at all of the country's regulated entities during the 2008 financial year. It explained that its more visible approach to inspections would ensure that firms were prepared for the forthcoming Financial Instruments and Exchange Law and the Basel II capital accord.
It added that it was also overseeing a range of "changes in the financial environment, such as the introduction of more sophisticated and complex financial products and transactions and an expansion of sales channels."
The FSA introduced its on-site monitoring programme in 2001 but individual meetings were only held at the request of firms. Under its new inspections regime meetings will be compulsory, reflecting the more aggressive oversight regime of Takafumi Sato, who left the FSA's supervisory bureau to lead the agency in June.
The FSA expects to hold meetings with senior executives from 645 financial services firms during the year, including deposit-taking institutions and insurers.
The regulator added: "The FSA will adequately conduct its inspections in accordance with the 'Financial Inspection Manual', which was wholly revised in February this year. Moreover, in conducting its inspections, the FSA will endeavour to examine each financial institution's business management and governance, legal compliance management, customer protection management and the management of all types of risks.
"Each financial institution is strongly required to set strategic objectives that clarify [its] company-wide profit targets and strategies for risk-taking, the allocation of human and physical resources, and proactively conduct risk management in line with the strategic objectives and in a manner suited to its characteristics."
Overseas entities
Foreign financial institutions will be subject to extra scrutiny under the new inspections regime, the FSA revealed. It will focus on overseas firms' compliance with Japanese financial laws and regulations and determine whether their internal controls are commensurate with the scale of their business.
The FSA added that it would pay special attention to firms that offered private banking services or derivative products to ensure that they offered adequate user protection.
