The Financial Services Agency of Japan (JFSA), the Bank of Japan (BOJ), and the Deposit Insurance Corporation have jointly published the BOJ Review, which focuses on the resolution of global systemically important banks (G-SIBs) and highlights the progress toward resolvability in Japan to address the too-big-to-fail (TBTF) problem. JFSA also notified about Fintech Cooperation Framework with the Financial Services Authority of Indonesia (OJK). Additionally, BOJ published report on Central Bank Digital Currency (CBDC).
Below are the key highlights of the recent updates
- The jointly published BOJ Review highlights that the authorities reviewed the international and domestic progress to address the TBTF problem over the past decade, and it can be assessed that steady progress has been made toward resolvability, beginning with the establishment of public "orderly resolution" schemes, followed by the developments of internal frameworks in financial institutions, and then addressing the practical issues. The report highlights that the TBTF problem cannot be solved only by improving the effectiveness of the resolution regimes; it is also important to effectively regulate and supervise financial institutions during normal times. It remains highly important for financial institutions to prepare for a crisis when the financial system is stable. For this reason, the authorities in Japan, in cooperation with Japanese G-SIBs and relevant host authorities, will continue to make steady progress on these initiatives.
- JFSA and OJK have exchanged letters on Fintech Cooperation Framework regarding innovation in the financial sector. This will lead to increased exchanges regarding innovative trends and strengthen the cooperative relationship between the two authorities. The cooperation framework also includes referral mechanisms for financial innovators, which will therefore facilitate their entry into Indonesian or Japanese markets.
- BOJ published the interim report prepared by Liaison and Coordination Committee on Central Bank Digital Currency. BOJ currently has no plan to issue CBDC, the BOJ considers it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner. BOJ expects that this paper will serve as a foundation for further discussion among a wide range of stakeholders on whether to introduce a CBDC and what framework it should take. The report details basic functions and core features of a CBDC, issuance and distribution of CBDC, technical experiments for CBDC conducted by BOJ, investigation and institutional arrangements.
Keywords: Asia Pacific, Japan, Banking, Resolution Framework, Resolvability, TBTF, G-SIBs, Fintech, Regtech, CBDC, Central Bank Digital Currency, Regulatory Capital, Indonesia, OJK, JFSA, BOJ
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