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    JFSA Issues Multiple Regulatory Updates for Banks

    January 31, 2023

    The Financial Services Agency of Japan (JFSA) published the results of a consultation on disclosure of corporate information, partial revisions to leverage ratio and capital adequacy ratio regulations concerning the Norinchukin Bank and Shoko Chukin Bank, a report on status of disclosure of certain provisions by banks, and a report on measures to deal with failed financial institutions. Additionally, JFSA issued consultations on the basic concept for ensuring operational resilience and on order for partial revision of the enforcement regulations of the Deposit Insurance Act.

    Below are the key highlights of these recent updates:

    • JFSA published results of the consultation on draft amendments to the Cabinet Office Ordinance on disclosure of corporate information, etc. JFSA proposed draft amendments to the disclosure of corporate sustainability initiatives, disclosure on human capital and diversity, and the principles for disclosure of descriptive information. The draft amendments also relate to disclosure on corporate governance, as well as other Cabinet Office Ordinance concerning exceptions, etc. for procedures using electronic data processing systems for disclosure. The Cabinet Order shall come into effect on the day of its promulgation provided, however, that the provisions of Article 2 and paragraph 3 of the following article shall be effective on April 01, 2023.
    • JFSA published partial revisions to Government Ordinances and public notices concerning leverage ratio regulations (Draft) and partial revisions to public notices concerning capital adequacy ratio regulations (Pillars 1 and 3) concerning the Norinchukin Bank and Shoko Chukin Bank (Draft), as well as partial revision of comprehensive guidelines for supervision of major banks, etc. (Draft). The amendments relate to the introduction of measures to raise the leverage ratio (leverage buffer) for global systemically important banks (G-SIBs) based on the "final Basel III rules" effective from March 31, 2023. Moreover, the Ministerial Ordinances, notifications, and supervisory guidelines will be applicable from April 01, 2024.
    • JFSA published a report on the status of disclosure of certain provisions by banks. JFSA reviewed the disclosure of allowances in the securities reports of major banks and regional banks for the fiscal year ended March 2022 and compared it with the fiscal year ending March 2021. The document mainly shares characteristic cases where progress in disclosure was seen in the above comparison and analysis. The document will be used as a reference to improve the disclosure of provisioning methods in accordance with the actual situation of each financial institution.
    • JFSA seeks comments, until February 16, 2023, on the draft basic concept for ensuring operational resilience. The draft highlights the importance of financial institutions to ensure their ability to continue to provide important operations at the minimum level that should be maintained. The draft consultation on operational resilience was prepared based on the international discussions on the "Principles for Operational Resilience" published by the Basel Committee on Banking Supervision (BCBS) in March 2021.
    • JFSA issued a report that covers the details of the measures taken by the government to deal with failed financial institutions and the status of dealing with bankruptcies from April 01, 2022 to September 30, 2022. The report will be submitted in accordance with Article 5 of the Law concerning emergency measures for the revitalization of financial functions.
    • JFSA published a consultation on order for partial revision of the enforcement regulations of the Deposit Insurance Act (Draft), with the comment period ending on January 10, 2023.

    Keywords: Asia Pacific, Japan, Banking, Basel, Regulatory Capital, Reporting, Disclosures, Operational Resilience, Deposit Insurance, Corporate Sustainability, G-SIBs, Leverage Ratio Requirements, JFSA

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