Minister Watanabe made an address at the meeting of the Director-General of the Local Finance Bureau(April 22)

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In this corner, we post photographs of the Minister, the Senior Vice Minister, the Parliamentary Secretary and FSA officials at work in meetings,conferences and other events.

Paliamentary Secretary Toida made an address at the seventh expert committee for measures forward multiple debtors (May 12)

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On April 18, 2008, the Financial Services Agency (FSA) and the representatives of the financial services industry agreed on the key principles to be shared and respected when financial firms conduct their business or when the FSA take supervisory actions.

Since last year, the FSA has been making efforts toward achieving ''better regulation.'' This initiative is based on the view that enhancing the attractiveness and competitiveness of Japan's financial and capital markets and enabling financial firms to provide high-quality financial services to meet user needs is one of the major challenges for Japan's economy and society. To this end, it is vital to improve the business and regulatory environment for both users and providers of financial services.

In this context, the FSA presented the concept of ''optimal combination of rules-based and principles-based supervisory approaches,'' and held extensive discussions with representatives of relevant financial firms on key principles, which would become the cornerstones of principles-based supervision. As a result, the FSA has agreed with the parties involved (see Note) to share the key principles (the ''Principles''), as drawn out in the table below.

The ''Principles'' are a set of key codes of conduct or general behavioral norms that form the basis of individual rules such as laws and regulations. A ''principles-based'' approach is a supervisory framework that, in line with the abovementioned Principles, places greater emphasis on encouraging voluntary efforts by financial firms aimed at ensuring better management.

Sharing common views on the Principles among a wide range of relevant parties is expected to bring about the following effects:

(1) Users of financial services will be able to tell in advance what they can expect in terms of the behavior of financial firms as well as the quality of financial services they offer, and thus purchase financial services with a sense of security.

(2) Financial firms that provide financial services will have a clear vision on the way they should act in cases where there are no applicable written rules or where interpretation of existing rules may vary. They could refer to the Principles as guidelines in their voluntary efforts to improve their services as well as develop and provide new ones, in order to respond flexibly to changing circumstances. In this sense, the Principles will indicate the direction in which the financial firms should head in their efforts to improve their services and the foundation of best practices. They may also serve as the basis for interpreting existing rules.

(3) For its part, the FSA can (i) ensure prompt and adequate supervisory responses based on the actual conditions of the firms concerned by complying with the basic ideas as outlined in the Principles when interpreting and applying rules at the time of on-site inspections and off-site supervision. Moreover, (ii) when conducting reviews of existing rules such as laws, regulations, the FSA's Inspection Manuals and Supervisory Guidelines, efforts aimed at simplifying and clarifying rules in line with the Principles can contribute to putting in place a market and regulatory environment that does not impede innovation or free competition in the area of financial services.

The FSA expects financial firms to make voluntary efforts towards business improvement based on the shared Principles. The FSA will also make utmost efforts to realize a better regulatory environment based on these Principles. To begin with, the FSA will strive to have all its staff members appreciate the Principles and thereby to carry out effective financial administration. It will also maintain continuous dialogue with financial service providers, and further deepen discussions.

In this connection, the FSA has amended the ''Administrative Action in the Financial Sector'' issued on March 1, 2007, following the sharing of the Principles. The ''Administrative Action in the Financial Sector'' clarifies the criteria for decision-making on administrative action by the FSA. The amendment has articulated the points to remember in the implementation of administrative action in line with the Principles. Specifically, it has made it clear that, in cases where the financial institution concerned is making voluntary efforts in an appropriate manner based on the Principles, that fact will be taken into consideration as a mitigating factor.

* For more details, please access ''The Principles in the Financial Services Industry'' (April 24, 2008) published in the Press Releases of the Financial Services Agency Website.

(Note) In putting together the Principles, the FSA held a series of meetings to exchange views with the following major industry associations: the Japanese Bankers Association; the Regional Banks Association of Japan; the Second Association of Regional Banks; the National Association of Shinkin Banks; the National Central Society of Credit Cooperatives; the Trust Companies Association of Japan; the International Bankers Association; the Life Insurance Association of Japan; the General Insurance Association of Japan; the Foreign Non-Life Insurance Association of Japan and the Japan Securities Dealers Association. The FSA also exchanged views on an individual basis with the National Association of Labor Banks, the Investment Trusts Association, and the Japan Securities Investment Advisers Association.

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