Featured Product

    IMF Publishes Technical Notes Under FSAP with Japan

    September 18, 2017

    IMF published five technical notes under the 2017 Financial Sector Assessment Program (FSAP) with Japan. This assessment comprises technical notes on the wide spectrum of financial sector, including banking, insurance, and securities.

    Technical Note on Insurance Sector Regulation and Supervision. This note provides an update on the insurance sector in the country, along with an analysis of certain key aspects of the regulatory and supervisory regime. The technical note refers to the Insurance Core Principles (ICPs) issued by IAIS in October 2011, as revised in November 2015. The note includes an analysis of Japanese practice in relation to selected ICPs, instead of a detailed assessment of observance of the ICPs. The assessment reveals that the regulatory and supervisory framework has been enhanced since the 2012 FSAP. Work is underway to develop a risk assessment methodology for insurance supervision. Corporate governance and solvency standards are two key elements supporting risk-based supervision. The risk and impact assessment will enable JFSA to determine the appropriate supervisory intensity for each insurer, along with a holistic supervisory plan.

     

    Technical Note on Detailed Assessment of Observance on Basel Core Principles (BCPs) for Effective Banking Supervision. This note summarizes assessment of the current state of the implementation of BCPs in Japan. Out of the 29 BCPs, Japan was found Compliant with 14 principles, Largely Compliant with 13, and Materially Non-Compliant with 2 principles. Japan was found to be materially non-compliant with principle on transactions with related parties and on the principle on capital adequacy, with a lack of Pillar 2 capital framework to tailor capital requirements more closely to individual bank risk profiles. The note also highlights that banking regulations and supervisory processes have undergone significant improvements since the last FSAP. Capital, liquidity, and disclosure requirements have been updated to incorporate the Basel III reforms agreed by the Basel Committee, in accordance with the internationally agreed timelines.

     

    Technical Note on Long-Term Challenges for Financial Intermediation. This note analyzes and quantifies the effect of aging in Japan—both at the national and regional levels—on the nature of financial intermediation and concludes that the relative role of banks is likely to diminish. Financial constraints to small- and medium-size enterprises and startups exacerbate the adverse effects of an aging society on productivity and economic growth. Financial sector policies should aim to address the constraints to financial access by further promoting risk-based lending and asset-based lending.

     

    Technical Note on Regulation and Supervision of Securities. This note reviews the functioning and effectiveness of the regulation and supervision of securities firms in Japan, using the relevant International Organization of Securities Commissions (IOSCO) documents as benchmarks. The note also discusses the regulatory and supervisory framework for the securities business conducted by banks and other financial institutions. The note highlights that the IMF-recommended review of the prudential framework—to be conducted within medium-term—should ensure that the framework appropriately addresses the financial stability and investor protection risks potentially arising from smaller firms’ activities. Such a review is needed to ensure that the framework remains appropriate when markets change.

     

    Technical Note on Systemic Risk Analysis and Stress Testing the Financial Sector. This note offers insights from a comprehensive set of stress tests conducted for banks and insurers under the FSAP. The aim of the FSAP stress test was to assess the resilience of the whole financial sector, rather than the capital adequacy of individual institutions. The top-down banking sector stress test covered 20 large banks, comprising 90% of the banking system assets. The results of these tests point to a broadly stable banking system, but some vulnerabilities exist among regional banks—three regional banks would need additional capital to meet the 8% total capital requirement, although the number is very small in terms of ratio to GDP. Additionally, top-down and bottom-up stress tests were conducted for seven life and six non-life companies, covering 73% and 92% of the respective sectors. Being less sensitive to higher interest rates, the non-life sector performs better, with a less-marked decline in average solvency margin ratios.

     

    Related Links

    Insurance Sector Regulation and Supervision (PDF)

    Observance on Basel Core Principles (PDF)

    Challenges for Financial Intermediation (PDF)

    Regulation and Supervision of Securities (PDF)

    Stress Testing the Financial Sector (PDF)

    Keywords: Asia Pacific, Japan, Banking, Insurance, Securities, FSAP, BCP, ICP, Basel III, Stress Testing, IMF

    Featured Experts
    Related Articles
    News

    EIOPA Forms Consultative Expert Group on Digital Ethics in Insurance

    EIOPA established the Consultative Expert Group on Digital Ethics in Insurance to assist EIOPA in the development of digital responsibility principles in insurance.

    September 17, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 848 and 470

    FASB proposed taxonomy improvements for the proposed Accounting Standards Update on topic 848 on facilitation of effects of reference rate reform on financial reporting.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Statement on Recalculating Transitional Measures Under Solvency II

    BoE notified that it will be willing to accept applications from firms to recalculate transitional measure on technical provisions (TMTP) as at September 30, 2019.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Hosts Conference to Discuss Issues from Emergence of Stablecoins

    BIS hosted a conference in Basel to discuss policy and regulatory issues posed by the emergence of stablecoin initiatives backed by financial institutions and large technology companies.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Paper on Embedded Supervision of Blockchain-Based Financial Market

    BIS published a working paper that investigates ways to regulate and supervise blockchain-based financial markets.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Paper on Market-Implied Systemic Risk and Shadow Capital Adequacy

    BoE published a working paper that presents a forward-looking approach to measure systemic solvency risk.

    September 13, 2019 WebPage Regulatory News
    News

    HKMA Consults on Policy Module on Pillar 2 Supervisory Review Process

    HKMA is consulting on the revised Supervisory Policy Manual module CA-G-5 that sets out the HKMA approach to conducting the supervisory review process under Pillar 2.

    September 13, 2019 WebPage Regulatory News
    News

    PRA Publishes Waiver by Consent of Continuity of Access Rules

    PRA published a new waiver by consent to waive the Continuity of Access requirements contained in the Depositor Protection Part of the PRA Rulebook (DPP).

    September 13, 2019 WebPage Regulatory News
    News

    EBA Single Rulebook Q&A: Second Update for September 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to three questions.

    September 13, 2019 WebPage Regulatory News
    News

    BoE Publishes Update on Meeting of Working Group on Risk-Free Rates

    BoE published the minutes of the July meeting of working group on sterling risk-free reference rates.

    September 13, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3827