21 April 2010

JSDA warns against inappropriate uniform regulations on capital requirements

The Japan Securities Dealers Association is concerned that uniform regulations excessively focused on capital requirements without proper consideration of the differences among jurisdictions may lead to skewed risk-taking incentives and impair the stability of real economies and financial markets.

The Japan Securities Dealers Association is concerned that uniform regulations excessively focused on capital requirements without proper consideration of such differences among jurisdictions may lead to skewed risk-taking incentives and impair the stability of real economies and financial markets.

 

“Japanese or other financial institutions which were following risk management strategies different from those of US/European institutions”, the JSDA underlines, noting that these institutions were relatively less affected by the recent financial crisis. “Excessively tight regulations on market transactions may create a vicious circle whereby a decrease in market liquidity leads to further declines”, JSDA warns.

 

Furthermore, the JSDA which is also functioning as a self-regulatory organization in the Japanese securities market, critically underlines that the consultative proposals have not yet suggested specific measures to help dampen ‘pro-cyclicality’ at this stage. Nor are specific measures regarding ‘contingent capital’ available, and the results of a ‘Quantitative Impact Study’ are yet not on the table. Therefore, JSDA calls on the BIS to extend the comment period on the proposal.

 

The full document is attached below