Japan: Financial Sector Assessment Program-Technical Note on Banking Supervision and Regulation Selected Issues

IMF Staff Country Reports, May 13, 2024

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Canonical URL: Japan: Financial Sector Assessment Program-Technical Note on Banking Supervision and Regulation Selected Issues

This Technical Note analyzes Banking Supervision and Regulation Selected Issues for the Japan Financial Sector Assessment Program (FSAP).
The scope focused on the key findings from the 2017 Basel Core Principles Detailed Assessment Report and the transformation of the supervisory approach by the Financial Services Agency (FSA) undertaken since the last FSAP.
The FSA has initiated a major transformation of its supervisory approach, moving from checklists to a principles-based, risk-focused engagement.
The FSA has shifted towards a more modern, risk-based approach to supervision that is better suited to overseeing and responding flexibly to an evolving banking system.

The FSA needs to accrue a cadre of staff that is sufficient both a cadre of staff that is sufficient both in terms of numbers and range of skills.
The FSA’s move from checklist-based supervision to principles-based, risk-focused engagement represents a major transformation in supervisory approach.
Greater attention is needed on the risks surrounding third party service providers, not least in the light of growing cyber threats.
The industry’s need to have access to relevant information in third party service providers may need to be secured on a regulatory or legislative basis.

The FSA should set appropriate minimum liquidity requirements for all banks, not only internationally active banks.
Strengthen supervisory workforce capacity: ensure sufficient numbers and range of skills among FSA staff to implement the transformed supervisory approach.
Enhance oversight of third party service providers with particular attention to cyber risks and information access, potentially via regulatory or legislative measures.