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11 February 2010

Japanese FSA: “Development of Institutional Frameworks pertaining to financial and capital markets”


In response to the financial crisis, the Financial Services Agency decided to start a detailed examination of the issues that Japan should address, including OTC markets and hedge fund regulation. It is also taking additional steps to improve the system, including the presentation of a draft bill.

In response to the recent global financial crisis, there have been various discussions in Japan and overseas on such topics as over-the-counter (OTC) derivative transactions and hedge funds. In view of these discussions and the actual condition of Japan’s markets, the Financial Services Agency (FSA) has decided to commence a detailed examination of the issues that Japan should address in preparation for the current ordinary session of the Diet. In the “Development of Institutional Frameworks Pertaining to Financial and Capital Markets”, published on November 13 2009, the FSA has announced it will conduct a survey of market participants and others on each of the issues discussed below.

 
Based on this survey, the FSA published on December 17, 2009 the “Draft Blueprint for the Development of Institutional Frameworks Pertaining to Financial and Capital Markets”, and has undertaken a further round of public consultation involving market participants, etc. Based on the feedback, the FSA has finalized the document “Development of the Institutional Framework Pertaining to Financial and Capital Markets” as shown below.
 
In addition, in cases, for example, where administrative penalties have been imposed on fund sales agents and trustee companies, at present a risk exists concerning the protection of investors, etc., owing to the fact that the FSA does not have the authority to initiate bankruptcy procedures of the fund sales agents or appointment of alternative trustees. Therefore, in order to protect the investors and beneficiaries, improvements to the system will be made to deal with such situations.
 
Going forward, the FSA is taking additional steps to improve the system, including the presentation of a draft bill for consideration at the Diet during the current session.
 
Among the proposals are:
 
·         Improving the stability and transparency of the settlement of OTC derivatives Transactions
·         Scope of the mandatory CCP clearing, and the system of CCPs
·         Data storage and reporting of trade information
·         Strengthening the securities clearing and settlement systems, including for government bond transactions and stock lending transactions
·         Strengthening regulations of major shareholders of financial instruments business operators
 


© FSA Japan


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