FSA Newsletter August, September 2006

The Study Team on Insurance Product Sales and Solicitation (Chair: Professor Shuya Nomura, CHUO UNIVERSITY Faculty of Law), which is organized under the auspices of the Financial Services Agency (FSA), recently (June 19, 2006) put together and published a document titled ''Final Report: Ideal Way of Providing Comparison Information which Helps Consumers Choose Products that Meet Their Needs''.

1. Background to Study
In consideration of suggestions that there are still a large number of complaints about sales and solicitation activities in the insurance industry and that product features have become difficult for consumers to understand due to more diversified and complicated insurance product lineups, the Study Team on Insurance Product Sales and Solicitation had been convened, with members including experts and service users, and conducted studies for the purpose of tackling such suggestions in a professional and practice-oriented fashion in order to improve user protection and user convenience.
The Study Team recently compiled a final report as described below, having conducted studies since March 2006 focusing on the ideal way of providing comparison information which would help consumers choose products that meet their needs.

2. Overview of Final Report
(1) Current Status of Provision of Comparison Information
At present, insurance companies do not necessarily compare products and cannot be deemed to be providing comparison information which helps consumers choose products that meet their needs.

(Note) Laws and regulations only prohibit indications, etc. that have the ''risk of causing misunderstanding'' with respect to comparisons of the features of insurance policies (paragraph 1 (6) of Article 300 of the Insurance Business Law).

The following may be the reasons why comparison information is not actively provided.

[P	oint of View based on Existing Regulations]
	- It is not exactly clear as to what exactly constitutes a comparison of features of insurance policies that has no ''risk of causing misunderstanding''.
[P	ractical Point of View]
	- If an insurance company, etc. tries to compare products it deals in (''its products'') with products that it does not deal in (''other products''), it is difficult to obtain accurate information on other products. - Insurance companies have no incentive to compare its products with other products. - When an independent agent, etc. prepares insurance solicitation documents including comparison tables, insurance companies request that they be screened and obtain their approval in practice. Insurance companies might not approve them due to the fear of infringing laws and regulations, etc.

(2) Approach to Study
The Study Team expressed its view that it is necessary to keep the following two points in mind when examining the ideal way of providing comparison information:
1) Promotion of provision of comparison information will help improve convenience for consumers.
2) In the event that comparison information with the ''risk of causing misunderstanding'' is provided, there is a risk that consumers might not be able to choose insurance products that meet their needs due to misunderstanding.

(3) Issues involved in providing Comparison Information
Comparison information required by consumers are deemed to be wide-ranging, spanning from information on features of insurance policies such as coverage and premiums, to information on ancillary services of the insurance product, and even information on the creditworthiness of the insurance company. The Study Team broadly divided such comparison information required by consumers into the following categories, and then examined the issues involved in providing each type of comparison information.

1) Information on the insurance product, such as the terms and conditions of the insurance contract (''product selection information'')
2) Basic information on the insurance company such as its financial position (''company selection information'')

A. Product Selection Information
Entities which provide product selection information are presumably (1) insurance companies, (2) exclusive agents, (3) independent agents, (4) insurance brokers, and (5) third parties. As described below, the Study Team examined matters to be considered by these entities when providing comparison information on the terms and conditions of insurance contracts, etc.
[Subject of Comparison]
For example, in the comparison of products with different insurance periods as in the case of life insurance and term insurance, or in the comparison of products that are distinguished by the existence of dividends as in the case of participating insurance and nonparticipating insurance, the Study Team expressed its view that it is necessary to make carefully thought-out statements so that consumers would not confuse the product with similar types of insurance, including providing a clear description of the differences in product features.
[Method of Comparison]
The following two methods of comparison may be considered.

1) Comparison by displaying the information prepared by insurance companies side-by-side (i.e., side-by-side comparison of insurance policy overview)
2) Comparison by using information provided by insurance companies processed into a comparable format (i.e., comparison at a glance based on comparison tables, etc.)

The Study Team expressed its view that the following information should be explicitly stated when providing comparison information due to its importance for consumers:

1) Description of the provider of comparison information;
2) Whether or not the provider has any special stake in the insurance companies, etc. which might undermine the impartiality and fairness of comparison information; and
3) The type of information used as the source of comparison information provided.

[Comparison Items]
(a) Acceptability of Partial Comparison
Comparison of some of the features of insurance policies (''partial comparison'') is not prohibited by the Insurance Business Law; partial comparison that has no ''risk of causing misunderstanding'' among consumers is permitted. That said, the fewer items there are in comparison information, consumers can compare insurance products more easily, but the risk of misleading consumers increases as only some of the information is stated. With this in mind, the Study Team examined cases in which partial comparison would be permissible and expressed its views as follows.

(i)	Comparison information using the insurance policy overview itself (including those in table format) → In principle, it has no ''risk of causing misunderstanding''.
(ii)	Simplified comparison information with less information volume than (i) → In principle, it has no ''risk of causing misunderstanding'' provided that all of the following requirements are met.

1) The insurance policy overview is provided at the same time as the comparison table for all insurance products covered in the comparison table.
2) The comparison table neither blatantly emphasizes only the merits of insurance products, nor makes the product look as if it is superior on the whole due to information that is an integral part of the merits not being made recognizable together with the presented merits.
3) The comparison table has the following cautionary statement.

- The comparison table does not show all the features of insurance products, and needs to be used purely as reference.
- The features of insurance products shown in the comparison table needs to be confirmed broadly and in detail in the insurance policy overview, etc. without fail.

(Note) The requirement referred to in 1) above is deemed to have been met even in cases where a framework has been developed to enable consumers to obtain an insurance policy overview promptly upon request (such as enabling the issuance of an insurance policy overview by post, etc. without delay upon a consumer's request) and is made common knowledge among consumers.

(b) Comparison of Premiums
Comparison of premiums has the risk of making consumers focus solely on the expensiveness/cheapness of premiums, resulting in the selection of a product without fully looking into other important factors such as coverage. Accordingly, the Study Team examined ideal ways to compare premiums without the ''risk of causing misunderstanding'' and expressed its views as follows.

(i)	If indications excessively highlight premiums 1) Due consideration needs to be given so that indications do not induce consumers to pay too much attention to premiums and overlook other important factors such as coverage. 2) At least, there must be an accompanying statement of the assumptions which affect the premium such as the terms and conditions of the insurance contract and the outline of the coverage. 3) If the premium substantially varies with the assumptions such as age, it would be appropriate to make a cautionary statement that it is necessary to inquire the insurance company, etc. about the actual premium applied before choosing the product.
(ii)	If indications of comparison include premiums except in cases referred to in (i) It is necessary to make creative efforts in the layout of the comparison table, the presentation method, etc. to avoid misleading consumers, including inserting an accompanying cautionary statement that consumers must compare and examine the products in consideration of not only premiums but also other factors such as coverage, in order to prevent consumers from paying attention only to premiums.
B. Company Selection Information Company selection information is deemed to be useful information for consumers when examining a company's solvency. Accordingly, the Study Team expressed its view that it would be appropriate to make an entity in an impartial and fair position to provide the following basic corporate information such as the insurance company's financial position, assuming that an explanation is provided to consumers at the same time so that there is no misunderstanding.
	1) Solvency margin ratio 2) Information on core profit, insurance underwriting margin, etc. 3) Sales offices and other basic information on insurance company (Note) In the United States, the National Association of Insurance Commissioners (NAIC) publishes company selection information such as financial data of insurance companies on its website so that consumers can obtain such information easily.
(4) Concrete Measures to Develop a Framework to Encourage Provision of Comparison Information The Study Team recommended that the following concrete measures be considered in light of the issues involved in providing comparison information as referred to in (3) above, in order to develop a framework for encouraging the provision of comparison information that would help consumers choose insurance products that meet their needs. 1) Amendment of Supervisory Guidelines Matters to be considered when providing comparison information relating to the aforementioned partial comparison, comparison of premiums, etc. should be clarified in the Supervisory Guidelines. 2) Disclosure of Information on Policy Overview by Insurance Companies Insurance companies should disclose information as follows on their respective websites, etc. to enable consumers to compare insurance products themselves and make it easier to prepare an accurate comparison table.
	- Disclosure of model examples of policy overview by insurance companies - Disclosure of a ''policy overview for comparison information'' which narrows down the items and information shown and standardizes the format. - Disclosure of a policy overview of the product demanded by a consumer that shows the premium, amount insured and other individual items, which is made available to consumers, agents, etc. if specific information on the consumer is entered.
3) Third-party Comparison Information Service Consumer groups, nonprofit organizations (NPOs) and other third parties should provide comparison information such as comparison tables in consideration of impartiality and fairness. 4) Establishment of Council to Develop a Framework to Encourage Provision of Comparison Information A voluntary council consisting of third parties who offer comparison information services, consumers, experts, the insurance industry and administrative authorities should be established, for the purpose of developing a framework for encouraging the provision of comparison information. The council is expected to fulfill the following roles.
	- The council will put together a collection of specific examples of comparison information, conduct a study on what kind of comparison information would be appropriate and publish the study findings in some way. - The council will inform and warn consumers about cases in which there is an extremely high possibility of consumers being victimized. It is also expected to play the following roles in the future. - Consider categorizing comparison information that has no ''risk of causing misunderstanding'' in each product field. - Examine items, format, etc. of ''policy overview for comparison information''.
5) Provision of Basic Corporate Information For example, financial data (solvency margin ratio, core profit, etc.) and basic corporate information (sales offices, etc.) should be published on FSA's website, in an effort to develop a framework that enables consumers to obtain such information easily. 6) Consumer Enlightenment Activities The Insurance Buyers' Guide (handbook for buyers) should state matters to be considered when comparing insurance products to make them common knowledge among consumers. 7) Monitoring of Inappropriate Comparison Information Supervisory authorities should continually verify whether insurance companies have developed an insurance solicitation management system to give appropriate indications and should monitor comparative indications based on the recently-revised Supervisory Guideline, in order to further enhance the framework for screening insurance companies' advertisements. - Among the measures mentioned above, it is hoped that the revision of the Supervisory Guideline, the disclosure of model examples of insurance policy overview, the provision of basic corporate information, the revision of the Insurance Buyers' Guide as part of consumer enlightenment activities and the monitoring of inappropriate comparison information will be implemented promptly. - The aforementioned council should examine the items, format, etc. of the ''policy overview for comparison information'' with respect to each product field. - The disclosure of individual items based on entry of consumer information should be left to voluntary, creative efforts of insurance companies. (5) Medium-term Challenges This is the final report by the Study Team on Insurance Product Sales and Solicitation. The following issues have been pointed out as medium-term challenges.
	1) Standardize terminology, formulate rules on providing explanations, etc. 2) Rewrite insurance clauses in plain language and simplify them in view of consumer convenience and consumer protection; 3) Improve the quality of insurance agents.

Overview
The Financial Services Agency (FSA) is currently putting together the Financial Inspection Basic Guidelines (FIBG) to help conduct accurate and effective inspections, etc. by taking the viewpoint of ordinary users, such as depositors, and the national economy in regards to financial inspections.
In order to ensure the proper implementation of FIBG and to prevent the mechanical/uniform implementation of inspection manuals, the FSA is performing inspection monitoring and making use of the findings as references for future inspections.
The FSA performs two types of inspection monitoring: onsite monitoring, in which a senior officer of the Inspection Bureau or the Regional Financial Bureau visits an inspected financial institution and directly asks its opinions on the implementation status of inspection and other matters; and offsite monitoring, in which the financial institution is asked to respond in writing after an inspection is completed.
Since the introduction of a questionnaire system for document-based offsite monitoring in July 2005, the FSA has received many responses and opinions and would like to express its deep gratitude to the parties concerned for their cooperation.
The results of the questionnaire-based offsite inspection monitoring were compiled and published on July 27, 2006.

Procedures of Questionnaire Survey
In the questionnaire survey, the inspected financial institutions were basically asked to answer 25 multiple-choice questions, including those relating to the execution status of inspections conducted by the FSA and Regional Financial Bureaus, by selecting one option from among the following four: ''1. Reasonable'', ''2. More or less reasonable'', ''3. Somewhat unreasonable'' and ''4. Unreasonable''.

Targeted Financial Institutions

177 financial institutions inspected in accordance with inspection manuals in July 2005 or later and notified of the inspection results no later than May 10, 2006.

Collection Period

From July 2005 to May 2006

Number of Respondents (Response Rate)

110 financial institutions (62%)

Results of Questionnaire Survey
The results of the questionnaire survey revealed that financial institutions that chose options ''1'' and ''2'' accounted for 58% and 35%, respectively, of all respondents.
In some questions, however, financial institutions that chose option ''1'' accounted for only about 40%, while quite a few financial institutions chose ''3'' in each question.
The following is a review of the comments written in response to questions in which option ''3'' was chosen, as well as the results of a study conducted by the FSA.

''Inspection Management''
Overall, financial institutions that chose either option ''1'' or ''2'' accounted for 93% of all respondents.

''Inspection Period'' and ''Timing of Inspection''

Financial institutions that chose option ''3'' accounted for 9% of all respondents in each of these questions. Their written comments included: ''the burden is heavy when the inspection period clashes with busy times such as the end of the financial year'' and ''the inspection period should be shortened as it affects the execution of operations depending on the size and other factors of financial institutions''.
In response to such comments, the FSA will continue to be mindful of lightening the burden on financial institutions, but please understand that there are limits to what can be done due to the need of inspections as well as problems including the current staffing regime.

''Consideration given to Business Hours''

Financial institutions that chose option ''3'' accounted for 10% of all respondents. Their written comments included ''the inspector left late on some days'' and ''please give us a rough idea of the finishing time in advance''.
In response to such comments, the FSA will make sure the chief inspector exercises sufficient control and will continue to make efforts in giving guidance to inspectors in training programs and at other such opportunities in the future, as consideration needs to be given to the burden on financial institutions. And if interviews, etc. are to be conducted outside office hours, the financial institutions' understanding will be required.

''Submission of Data''
On the whole, financial institutions that chose either option ''1'' or ''2'' accounted for 98% of all respondents.
However, for the question on ''setting of submission deadline'', financial institutions that chose option ''3'' accounted for 5%. Their written comments included ''the deadline was too soon and the paperwork was burdensome.''
In response to such comments, the FSA will make sure the chief inspector exercises sufficient control and will continue to make efforts in giving guidance to inspectors in training programs and at other such opportunities in the future.

''Execution Status of Inspections, etc.''
On the whole, financial institutions that chose either option ''1'' or ''2'' accounted for 89% of all respondents.
However, for the question on ''dialogue upon verification'', financial institutions that chose option ''3'' accounted for 5%. Their written comments included ''it is questionable that the dialogues were fruitful and adequate.''
In response to such comments, the FSA will continue to give instructions to ensure that the chief inspector gives guidance to inspectors and strictly enforce dialogues among inspectors in training programs and at other such opportunities in the future, as there is a risk that it might lead to the mechanical/uniform implementation of the manuals.
Furthermore, for the question on ''inspectors' attitude'', financial institutions that chose option ''3'' accounted for 4% of all respondents. Complaints have been received regarding the language and behavior of some inspectors. With respect to this issue, the FSA will give instructions to make sure that the chief inspector gives guidance to inspectors, and strictly enforce a calm and levelheaded attitude among inspectors during inspections in training programs and at other such opportunities.

''Inspection Results Notice''
On the whole, financial institutions that chose either option ''1'' or ''2'' accounted for 98% of all respondents, and those that chose option ''1'' accounted for 73%.
However, for the question on ''time taken to issue notice'', financial institutions that chose option ''3'' accounted for 3%, and requests for a shorter waiting period for the notice were received.
In response to such comments, the FSA believes that it is important to issue inspection results notices as quickly as possible, and has established its basic policy to issue a notice roughly within three months of completing the inspection as a general rule and is striving to issue notices as soon as possible.

''Inspection Monitoring''

None of the comments received were against the implementation of onsite monitoring. The need for the onsite monitoring system itself seems to have been acknowledged.
As some financial institutions commented that the questions in the questionnaire survey for offsite monitoring were hard to understand, the FSA is currently reviewing the questions. Especially with respect to the question on ''comparison with previous inspection'', financial institutions that responded ''inspection was conducted from a new angle in some areas'' accounted for 30% of all respondents. As this is deemed to be attributable to the introduction of the rating system, the FSA will review the questioning method.
The FSA is committed to conducting inspections in a more appropriate manner, in consideration of the various comments received in inspection monitoring and on other occasions. Financial institutions' understanding of and cooperation in inspection monitoring will be highly appreciated in the future.

[return to Contents]

Summary of Issues by the Round Table Conference on the Financial Market Intermediation Function of Securities Companies

The Council on Securities Companies' Financial Intermediation Functions established under the Supervisory Bureau of the Financial Services Agency (FSA) compiled and published a summary of issues on June 30, based on discussions held since March 2006.

It appears that the securities market faces many challenges, as exemplified by the unfair trading by investors and misconduct by issuers of late, as well as the erroneous buy/sell orders placed in the stock market since last year.
In order to deal with such challenges, it is deemed necessary for securities companies(note), which have strong public characteristics as market intermediaries, to properly demonstrate their functions by maintaining self-discipline, in conjunction with legislation and enforcement (law enforcement system) including the recently-enacted Financial Instruments and Exchange Law.

^(Note)

Role of Securities Companies

In the securities market, there are a wide range of investors such as institutional investors, ordinary individual investors and funds, and there are various issuers such as listed companies. Access to the securities market by any entity requires intermediation by securities companies. Securities companies which serve as market intermediaries in this context are required to demonstrate their market intermediation functions in an efficient and stable manner, as well as functions to check unfair trading, etc. by investors and issuers.
Furthermore, securities companies trade securities themselves as market players. When doing so, they are required to carry out business operations in a sound and appropriate manner based on strict self-discipline [

Figure 1].
As concrete measures to achieve this, it is deemed necessary to utilize the self-regulation functions of the Japan Securities Dealers Association (JSDA), etc. and develop rules to enhance self-discipline among securities companies.

The Council has conducted studies with a critical awareness of these matters, in view of the following four themes:

I) Improve reliability of operations as market intermediaries;
II) Demonstrate securities companies' functions to check issuers;
III) Demonstrate securities companies' functions to check investors; and
IV) Maintain self-discipline of securities companies as market players.

As part of the Council's efforts to summarize the issues, issues that should be tackled by securities companies are being selected and identified from among various issues currently facing the securities companies. The Council is presenting a future approach to issues that have been identified, and demanding that the JSDA, stock exchanges and other interested parties look into the code of ethics, self-imposed regulations, etc. implemented by the industry itself [

Figure 2].

JSDA has already taken certain actions, such as establishing self-imposed regulations aimed at preventing erroneous buy/sell orders. Moreover, JSDA has established a working group and a subcommittee on the issue regarding the screening of insurance underwriting, in which discussions are actively being held. It is hoped that the interested parties will continue to make proactive efforts in accordance with the approach presented by the Council. The FSA intends to make contributions and provide assistance in an appropriate fashion with respect to such efforts.

[return to Contents]

Summary of Issues in Joint Study by Ministry of Finance, Bank of Japan and Financial Services Agency on Development of Financial and Capital Markets in Asia and Japanese Market

With the increase of interdependency among Asian countries and Japan, a sound development of Asian financial and capital markets has become indispensable for sustainable economic growth of Asia including Japan. Under this circumstance, financial institutions and markets of Japan are required to play an even greater role in the development of the Asian financial sector.
Against this background, this joint study was conducted with the cooperation of the Ministry of Finance and the Bank of Japan. In the Study, interview surveys with financial institutions were conducted and in addition to that, an advisory panel consisting of experts from the private sector and academics (chaired by Prof. Naoyuki Yoshino, Keio University) was established in January 2006. In the panel meetings, held three times in total, members discussed the present state of the financial and capital markets in Asia and the challenges they face, as well as the Japanese market as their mainstay. A paper, titled 'Summary of Issues in Joint Study on Development of Financial and Capital Markets in Asia and Japanese Market', compiled by the secretariat of the joint study² and issued June 30^th, summarizes the current situation identified and the issues discussed by the joint study group mainly through panel meetings and interview surveys.
The followings are brief summaries of the paper.

I. Outline of 'Summary of Issues in Joint Study on Development of Financial and Capital Markets in Asia and Japanese Market'
1. Overview of Financial and Capital Markets in Asia and Japan's Challenges
• Overview of Financial and Capital Markets in Asia
Since the recovery from the Asian currency crisis, Asia has become increasingly important as a financial services market, while it has experienced such changes as (i) the growing presence of American and European financial institutions and (ii) the expansion of the retail market driven by economic growth and the growing middle class, etc. However, its capital markets remain underdeveloped and the intra-regional flow of funds is still limited, despite the efforts that have been made by countries within the region to foster the markets.
Furthermore, while Asian countries have taken actions to liberalize their financial markets and open them up, they vary widely in terms of content and strictness of their respective financial services regulations, tax systems, foreign exchange regulations, etc. Moreover, despite their progress on the financial infrastructure front such as legal framework, it has been pointed out that their challenges remain in ensuring the effectiveness of such infrastructure. One such example may be the framework for disclosure of corporate information aimed at improving the transparency and credibility of corporate financial data that was developed recently as part of the corporate governance reform carried out rapidly in each country throughout the late 1990s.

• Japanese Financial Institutions' Operations in Asia
Since the mid-1990s, Japanese financial institutions either curtailed or withdrew their overseas operations in response to the series of international financial crises, such as the Asian currency crisis, and the non-performing loans problem in Japan. Meanwhile, American and European financial institutions have strengthened their presence and increased the ratio of earnings from Asia through such operations as investment banking in conjunction with corporate restructuring after the currency crisis, the acquisition of local financial institutions and the expansion of retail banking taking advantage of brand value. On the other hand, the financial services needs of Japanese companies-who have traditionally been the principal clients of Japanese financial institutions' operations in Asia-have become more sophisticated and diversified reflecting changes in their business activities associated with the enhancement of internal financial functions of these companies, and the establishment of production and sales networks in Asia.
However, Japanese financial institutions have recently started expanding into Asia again, as exemplified by the rapid increase in loans made by Japanese banks to local subsidiaries of Japanese companies, and are deemed to continue securing earnings in the future from operations targeted at Japanese companies by capitalizing on the breadth and depth of Japanese companies' reach in Asia. To achieve this, Japanese financial institutions need to further improve their local-currency operations, M&A and related advisory operations, cash management services, receivables liquidation operations, etc., to meet Japanese companies' diversifying needs for financial services.
Moreover, in building business relations with local (non-Japanese) companies, Japanese financial institutions need to improve their ability to develop products and propose solutions and broaden the investor base, in addition to localizing business systems such as making full use of local staff who have advantages in such areas as collecting information on local business practices, credit risks, etc.

• Approach of Japanese Authorities
In regards to the approach of Japanese authorities concerned with developing financial and capital markets in Asia, the following have been identified as important: enhancing collaboration among financial supervisory authorities aimed at conducting proper inspections and supervision of financial institutions, engaging in negotiations for further deregulation of financial services, providing technical assistance to improve the financial infrastructure and to ensure their effectiveness. In particular, for the development of financial and capital markets in Asia, it is necessary to make qualitative improvements in disclosure and audits that would alleviate the asymmetry of information and enable investors to make investment decisions based on appropriate information; hence, it is necessary to promote information sharing on policies and practices among authorities and cooperation in enhancing the capacity, including human resource development of Asian authorities.
As indirect financing continues to play a prominent role and is deemed to serve as the principal means of financing in Asia, banking sector's governance and its monitoring of corporate governance of borrowing companies as part of efforts to manage its credit risks will be of great importance, from the viewpoint of making qualitative improvements in disclosure and audits. As supervision of banks is significant for banking sectors to also fulfill such functions, technical cooperation is important on supervisory authorities in each Asian country in this regard.

2. Regional Financial Cooperation
From the point of regional financial cooperation, namely the Asian Bond Markets Initiative (ABMI), markets in Asia will continue to face common challenges, such as to increase the number of both issuers and investors, foster the corporate bonds market which is underdeveloped compared to the government bonds market, clarify the market rules, and further develop the market infrastructure for disclosure, rating, etc. The public and private sectors need to continue coherent efforts in tackling these challenges in the future.

3. Role of Japanese Market in Flow of Funds in Asia
While deregulation of the Japanese market has largely been achieved by the ''financial big bang'', progress has not necessarily been sufficient in terms of internationalization of market partly due to flagging transactions associated with the stagnation of the Japanese economy in recent years. In order for the Japanese financial capital market to play a crucial part as a financing market for Asian countries against the background of its abundant financial assets, it is necessary to examine measures to further improve the convenience of the market as well as encouraging foreign companies' listing on Japanese stock exchanges by utilizing, for instance, such schemes as Japanese Depositary Receipts (JDR). In addition, in order for Japanese markets to function as one of the central financial markets in Asia, it is also important that the cross-border yen-denominated syndicated loan market in Japan is developed and efforts are made towards its development.

II. FSA's Response
The FSA will use the paper as a reference in its administration and hopes private financial institutions will do so when considering their respective Asian business.

²Office of International Affairs of the General Coordination Division of the Planning and Coordination Bureau at the Financial Services Agency

[return to Contents]

Consultation Requests Received by Counseling Office for Financial Services Users

The number of consultation requests received by the Counseling Office for Financial Services Users (hereinafter referred to as ''Counseling Office'') , the gist of major consultation cases and other such information are released to the public on a quarterly basis. The consultation requests, etc. received, their characteristics and other related information for the quarter commencing April 1, 2006 and ending June 30, 2006 are as follows.

(1) We received a total of 13,938 consultation requests, etc. between April 1, 2006 and June 30, 2006. The average number of consultation requests, etc. received per day was 225 and greatly increased compared to the level in the previous period from January 1, 2006 to March 31, 2006 (158 requests).
(2) By subject, the number of consultation requests, etc. related to depositing, financing, etc. totaled 3,527 (25%), insurance products, etc. totaled 3,882 (28%), investment products, etc. totaled 3,053 (22%), cash loans, etc. totaled 1,915 (14%) and financial administration in general and other issues totaled 1,561 (11%).
(3) The following characteristics, etc. were identified with respect to each subject area.

a.	Depositing, financing, etc.: With respect to financing services, we received consultation requests concerning the execution and repayment of loans, etc. With respect to depositing services, we received consultation requests relating to the deposit-making structure, such as personal identification procedures.
b.	Insurance products, etc: We received consultation requests, etc. concerning insurance payments, insurance companies' responses to insurance claims, etc.
c.	Investment products, etc.: We received consultation requests, etc. relating to unlisted shares, securities companies, securities reports, foreign exchange margin trading businesses, etc.
d.	Cash loans, etc.: We received consultation requests, etc. relating to inquiries about the existence of moneylender registration, requests for administration, individual transactions, contract results, etc.

(4) Consultation requests, etc. received by the Counseling Office included information that would be useful for inspection and supervision purposes. For the purpose of protecting users in general and improving user convenience, we make use of such valuable information in financial administration, when conducting verification as part of an inspection, conducting interviews for supervision, issuing reporting orders and taking administrative action with respect to the financial institution concerned:

a.	Information on credit crunch and oppressive debt collection;
b.	Information on the sale of financial products to a borrower by a financial institution exploiting its dominant position;
c.	Information on improper conduct by salespersons, etc. of an insurance company (such as abetting non-disclosure, paying insurance premiums on behalf of the policyholder, producing a contract without authorization and borrowing someone else's name)