FSA Newsletter December 2006
Minister Yamamoto received a report from Tetsuo Seki, Chairman of Subcommittee on Certified Public Accountant System of Financial System Council (December 22) Minister Yamamoto made an address at conference on facilitating small- and medium-sized enterprises (SME) financing (December 11)
Minister Yamamoto received a report from Tetsuo Seki, Chairman of Subcommittee on Certified Public Accountant System of Financial System Council (December 22) Minister Yamamoto made an address at conference on facilitating small- and medium-sized enterprises (SME) financing (December 11)

 

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Establishment of a Study Group for the Revision of the Financial Inspection Manual


The Inspection Bureau of the Financial Services Agency (FSA) has established a study group whose members include private sector professionals for the purpose of conducting in-depth discussions from a specialized and technical perspective on the revision of the inspection manual for deposit-taking financial institutions, etc. (hereinafter referred to as "Financial Inspection Manual").
The study group was established to deal with areas that are not fully covered by the existing Financial Inspection Manual, including changes in the present circumstances as exemplified by the need to strictly enforce customer protection and to steer reforms to financial inspection through such means as the introduction of the Financial Inspection Rating System (FIRST) since the formulation of the Financial Inspection Manual in July 1999, in addition to adapting to Basel II, which is due to be applied from the year ending March 31, 2007.
The study group has been convened four times to date (as of November 15). The plan is to continue holding discussions in the study group in consideration of the actual state of deposit-taking financial institutions, etc. with the aim of revising the Financial Inspection Manual.
In regards to the section relating to Basel II, which is due to be applied from the year ending March 31, 2007, we have published a document titled "Financial Inspections after Commencement of Application of Basel II" (procedures launched in order to invite public comments) on November 16, taking into account the high level of interest and need for preparation among financial institutions, and in consideration of the discussions that have taken place in the study group. This section will form part of the revised Financial Inspection Manual in full, together with other revised sections.

(Note) The Financial Inspection Manual is regarded as the inspectors' guidebook that summarizes the basic approach to financial inspection and the specific areas to which attention should be paid upon conducting inspection.
 

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Financial Institutions' Efforts to Improve Customer Satisfaction (FY2005)


1. Program for Further Financial Reform
The Program for Further Financial Reform announced to the public on December 24, 2004 the "establishment of financial institution management with an emphasis on user satisfaction", specified as one of the measures to develop a framework that enables customers to perform transactions after gaining an understanding and making an informed decision, in order to create a dynamic financial system and improve customer satisfaction.

(Reference) "Conference for Improved User Satisfaction"
Upon taking the aforementioned measures, the Conference for Improved User Satisfaction was convened in conjunction with the types of business affected (deposit-taking financial institutions, insurance companies, securities companies and moneylenders) with the participation of experts, customers and industry groups from May to July 2005, with the view of helping financial institutions' efforts in gathering a broad swathe of customers viewpoints.

2. Publication of Financial Institutions' Efforts to Improve Customer Satisfaction
In August 2005, the FSA requested that financial institutions make efforts to improve their operations in FY2005 in consideration of customers' opinions, complaints, etc. that had been identified by the respective means chosen by financial institutions including questionnaire surveys on customer satisfaction, and to publicly announce the areas in which such efforts were being made and other relevant matters by the end of June 2006, in addition to reporting the nature of such efforts to the FSA.
Consequently, the FSA published a summary of the reports submitted by a total of 1,069 companies consisting of deposit-taking financial institutions, insurance companies, securities companies and moneylenders.

3. Published Content
Financial Institutions' Efforts to Improve Customer Satisfaction (FY2005)
* Execution rate and publication rate of efforts to gather customers' opinions and business improvement efforts in consideration of customers' opinions

An observation of the extent to which reports on financial institutions' efforts to improve customer satisfaction in FY2005 have been submitted to the FSA reveals that the submission rate was generally high among all types of business.
Approximately 87.1% of all financial institutions that submitted a report to the FSA made efforts to gather customers' opinions (questionnaire survey, complaints/inquiries data compilation, etc.). About 52.3% of all financial institutions that undertook such efforts published the questionnaire survey results, etc.
Furthermore, approximately 64.6% of all financial institutions that submitted a report to the FSA undertook business improvement efforts in consideration of customer opinions. About 70.8% of all financial institutions that made such efforts announced the nature of the efforts undertaken to the public.
As shown above, some financial institutions refrained from announcing the nature of the efforts they undertook to the public. The FSA believes that if financial institutions publish their efforts to the general public and provide information to customers, improvements in customer satisfaction can be sought through customer evaluation.
It is hoped that in future financial institutions will publish the nature of their efforts more proactively.

* Method of gathering customers' opinions
Many companies were found to have used questionnaire surveys and interviews as methods of gathering customers' opinions. While some companies were found to have undertaken analyses of complaints/inquiries as a method, they were fewer in number compared to those that used questionnaire surveys and interviews.

* Specific business improvement efforts in consideration of customers' opinions
<Deposit-taking Financial Institutions>

Deposit-taking financial institutions made efforts to: improve the security of ATMs, online banking, etc. to deal with the problem of counterfeit and stolen cash cards; improve branch facilities including barrier-free access; review and develop loan-related products and deposit/investment-related products; reform transactions over the Internet and other such efforts.
<Insurance Companies>
Life insurance companies: Many life insurance companies were found to have made efforts to provide more thorough explanations upon entering into contracts and dealing with customers with regards to making payments.
Non-life insurance companies: Many non-life insurance companies were found to have made efforts to improve the provision of information, provide more thorough explanations upon entering into contracts and dealing with customers upon the signing of such contracts especially when dealing with initial responses in the event of accidents.
<Securities Companies>
Many securities companies were found to have made efforts to improve and enhance the content of information provided through various methods (lectures, seminars, etc.), as well as efforts to improve and enhance Internet-related services, reduce fees, enhance the advisory service framework by improving the staff's etiquette and knowledge, and so on.
<Moneylenders>
As voluntary efforts to tackle the multiple debt problem, the seven leading consumer credit companies provide assistance in sound family budget management and distribute information on the safe use of credit, etc.
Furthermore, credit card companies, etc. are making improvements in point-based rewards programs.
 

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Amendment of Administrative Guidelines
(Volume III: For Non-Bank Finance Companies)


1. Introduction
The Financial Services Agency (FSA) has amended the Administrative Guidelines for Moneylending Businesses (Volume III: For Non-Bank Finance Companies), considering that various suggestions have made with respect to consumer credit groups' life insurance and that violations of laws and regulations stemming from moneylenders' poor understanding of the Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits have been occasionally uncovered during inspections and supervision. This article explains the background to and the outline of the amendment of the Administrative Guidelines.

2. Background to Amendment of Administrative Guidelines
Consumer credit groups' life insurance refers to life insurance taken out when a person uses consumer credit, whereby the consumer credit company becomes the policyholder and the debtor becomes the insured. While it enables the bereaved family, etc. to secure a stable livelihood in the event of the death of the debtor through the elimination of debt with insurance money, it has been pointed out that it may promote harsh debt collection by moneylenders.
Furthermore, in recent years, although moneylenders have stipulated and received interest per se not exceeding the interest rate cap set forth in the Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits, moneylenders are occasionally found to have requested and received interest exceeding the interest rate cap set forth in the said Law as a result of their poor understanding of those deemed as interest under paragraph 7, Article 5 of the said Law (so-called "deemed interest").
In consideration of this situation, the FSA decided to further clarify the provisions of Article 21 of the Moneylending Control Law and paragraph 7, Article 5 of the Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits in order to ensure appropriate operations by moneylenders.

3. Outline of Amendment
(1) Clarification of matters corresponding to "intimidation" referred to in paragraph 1, Article 21 of the Moneylending Control Law (relating to 3-2-6 (1) and 3-6)

Paragraph 1 of Article 21 of the Moneylending Control Law prohibits moneylenders engaging in intimidation or causing trouble to people by way of words/deeds that are disruptive to their private lives or businesses when collecting debt. The Administrative Guidelines provide examples of cases with a high risk of being deemed as "intimidation".
Under no circumstances may moneylenders coerce or otherwise encourage a debtor, etc. to pay on insurance claim by threatening to harm his/her own body, life and/or assets, or to otherwise cause trouble to the debtor, etc. for the purpose of debt collection. Therefore, the Administrative Guidelines clarify that such acts correspond to "intimidation" referred to in Article 21 of the Moneylending Control Law and that such acts of debt collection are prohibited.
It is unacceptable to unduly resort to such acts for the purpose of debt collection not only for insurance money based on consumer credit groups' life insurance taken out when using consumer credit but also for insurance money such as those of life insurance already taken out by the debtor.
(2) Clarification of definition money regarded as interest under paragraph 7, Article 5 of the Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposit (relating to 3-2-10)
Paragraph 7, Article 5 of the Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits prescribes that any money-except the principal-received by a moneylender in relation to the loan regardless of what it is called will be regarded as interest under said law.
Therefore, guarantee charges payable to guarantee businesses and notary document preparation fees payable to judicial scriveners, etc. that are received temporarily on behalf of the payees have typically been regarded as interest. The latest amendment of the Administrative Guidelines affirms this interpretation.
The latest amendment is purely aimed at clarifying the interpretation and implementation of the existing Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits. It should be noted that the bill for the amendment of the Moneylending Control Law currently being deliberated in the Diet dramatically revises the definition of interest itself under the Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits.

4. Conclusion
The amendment of the Administrative Guidelines for Moneylending Businesses is as explained above. Moneylenders' compliance with the amended Administrative Guidelines is deemed to promote appropriate business operations of moneylenders and help protect customers. The FSA will continue making efforts in supervising moneylenders in a strict and appropriate manner in consideration of the latest amendment to the Administrative Guidelines.

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EDINET Advancement Council: Convocation of Working Group


Purpose of Convocation of Meetings
The Service/System Optimization Plan for Operations relating to Securities Reports, etc. formulated by the Administrative Data Computerization Committee of the Financial Services Agency (FSA) on March 28, 2006 aims to enhance the secondary usability of disclosed information and to render disclosure documents, etc. more user-friendly through the introduction of XBRL, as well as developing a more user-friendly system environment for the general public. The FSA is currently restructuring EDINET based on the Optimization Plan, in which the introduction of XBRL, etc. will affect business routines in many relevant institutions. Accordingly, the FSA decided to convene a working group as part of the EDINET Advancement Council, as it is necessary for relevant institutions to make collaborative efforts and gather viewpoints from throughout the scope of affected institutions and for the FSA to make its approach common knowledge upon determining XBRL application policies, etc. in practice.
Views gathered by the working group will be used as reference material in conducting studies on the specific services and functions relating to EDINET, in pursuit of the advancement of disclosure information and improvement of system convenience.

* EDINET (Electronic Disclosure for Investors NETwork, an electronic disclosure system for disclosure documents such as securities reports), is a system in which parties that are required to submit disclosure documents such as securities reports submit information to be stated in disclosure documents to the Local Finance Bureau online (over the Internet) and make such disclosed information available for public review on the monitor screen installed in the viewing room of the Local Finance Bureau, in addition to making such information available to the general public over the Internet.

* XBRL (eXtensible Business Reporting Language) is an internationally standardized computer language for preparing, distributing and using financial information in an efficient manner. There is a rapidly growing trend to introduce XBRL, especially in the United States and Europe.
 

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