FSA Weekly Review No.542 June 22, 2023

FSA Weekly Review No.542: June 22, 2023

What’s New on the FSA Website

Week of June 9, 2023 - June 15, 2023

This page contains the latest in events, developments, and updates to the FSA website.

Press Conferences

June 15, 2023	Excerpts of the Presidency Press Conference Following the G7 Finance Ministers and Central Bank Governors’ Meeting (May 13, 2023)
June 15, 2023	Ad Hoc Press Conference by the Minister of State for Financial Services (May 11, 2023)
June 15, 2023	Press Conference by the Minister of State for Financial Services (May 9, 2023)
June 15, 2023	Ad Hoc Press Conference by the Minister of State for Financial Services (May 2, 2023)

Public Comments

June 15, 2023	Publication of the draft "Cabinet Office Order on the Designation, etc. of Specified Social Infrastructure Providers and Other Related Entities, Based on the Act on the Promotion of Ensuring Economic Security Through Implementation of Integrated Economic Measures" (i.e. the "Economic Security Promotion Act") [provisional English title] and other relevant and applicable draft Orders for public consultation <Summary> The FSA proposed the draft "Cabinet Office Order on the Designation, etc. of Specified Social Infrastructure Providers and Other Related Entities, Based on the Act on the Promotion of Ensuring Economic Security Through Implementation of Integrated Economic Measures" (i.e. the "Economic Security Promotion Act") [provisional English title] and other relevant and applicable draft Orders (hereinafter collectively referred to as "the proposal") for public consultation. The proposal is mainly aimed at setting forth proceedings pertaining to the designation, etc. of specified social infrastructure providers, including the description (details) of specified important facilities applicable to the financial sector, criteria for designating specified social infrastructure providers, and the format, etc. (modalities) of the notification for designation, in response to the enforcement of the "Act on the Promotion of Ensuring Economic Security Through Implementation of Integrated Economic Measures" (provisional English title). Public comments will be accepted until 11:59 p.m. [JST], July 14, 2023. The original press release is available in Japanese at the following URL: https://www.fsa.go.jp/news/r4/sonota/20230615/20230615.html
June 9, 2023	Publication of the finalized amendments to the relevant and applicable Cabinet Office Orders, Ministerial Orders, and regulatory notices pertaining to leverage ratio requirements applicable to the federations of shinkin banks and the highest designated parent company after public consultation <Summary> As of June 9, 2023, the FSA finalized the amendments to the relevant and applicable Cabinet Office Orders, Ministerial Orders, and regulatory notices pertaining to leverage ratio requirements applicable to the federations of shinkin banks and the highest designated parent company after public consultation conducted in July 2022, following the corresponding amendments applicable to banks and bank holding companies, and to the Norin Chukin Bank and the Shoko Chukin Bank Limited, which were respectively promulgated in November 2022 and in January 2023. The FSA announced on March 25, 2022, that the temporary measure to exclude the outstanding balance of financial institutions' current accounts at the Bank of Japan (BOJ) from the calculation of leverage ratio exposures would end at the end of March 31, 2024. The finalized amendments to the Cabinet Office Orders, Ministerial Orders, and regulatory notices raise the required level of leverage ratio from 3% to 3.15%, while excluding the outstanding balance of financial institutions' current accounts at the BOJ from the exposure measure in exceptional macroeconomic circumstances from April 2024 onwards, for the post-COVID-19 response framework. The respective Cabinet Office Orders, Ministerial Orders, and regulatory notices will take effect on April 1, 2024. Note: ・ For G-SIBs, an additional 0.05% would be added to the leverage buffer to compensate for the leverage buffer applicable to G-SIBs. ・ The minimum required TLAC ratio on a total leverage exposure basis will be also raised by 0.35% from 6.75% to 7.10%, after excluding the outstanding balance of financial institutions' current accounts at the BOJ. ・ Leverage ratios and total leverage exposure-based TLAC ratios shall continue to be disclosed for both the values that include and exclude the outstanding balance of financial institutions' current accounts at the BOJ. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/ginkou/20230609/20230609.html

June 15, 2023

Publication of the draft "Cabinet Office Order on the Designation, etc. of Specified Social Infrastructure Providers and Other Related Entities, Based on the Act on the Promotion of Ensuring Economic Security Through Implementation of Integrated Economic Measures" (i.e. the "Economic Security Promotion Act") [provisional English title] and other relevant and applicable draft Orders for public consultation
<Summary>
The FSA proposed the draft "Cabinet Office Order on the Designation, etc. of Specified Social Infrastructure Providers and Other Related Entities, Based on the Act on the Promotion of Ensuring Economic Security Through Implementation of Integrated Economic Measures" (i.e. the "Economic Security Promotion Act") [provisional English title] and other relevant and applicable draft Orders (hereinafter collectively referred to as "the proposal") for public consultation.
The proposal is mainly aimed at setting forth proceedings pertaining to the designation, etc. of specified social infrastructure providers, including the description (details) of specified important facilities applicable to the financial sector, criteria for designating specified social infrastructure providers, and the format, etc. (modalities) of the notification for designation, in response to the enforcement of the "Act on the Promotion of Ensuring Economic Security Through Implementation of Integrated Economic Measures" (provisional English title).
Public comments will be accepted until 11:59 p.m. [JST], July 14, 2023.

The original press release is available in Japanese at the following URL:
https://www.fsa.go.jp/news/r4/sonota/20230615/20230615.html open new window

June 9, 2023

Publication of the finalized amendments to the relevant and applicable Cabinet Office Orders, Ministerial Orders, and regulatory notices pertaining to leverage ratio requirements applicable to the federations of shinkin banks and the highest designated parent company after public consultation
<Summary>
As of June 9, 2023, the FSA finalized the amendments to the relevant and applicable Cabinet Office Orders, Ministerial Orders, and regulatory notices pertaining to leverage ratio requirements applicable to the federations of shinkin banks and the highest designated parent company after public consultation conducted in July 2022 open new window

, following the corresponding amendments applicable to banks and bank holding companies open new window

, and to the Norin Chukin Bank and the Shoko Chukin Bank Limited open new window

, which were respectively promulgated in November 2022 and in January 2023.
The FSA announced on March 25, 2022, that the temporary measure to exclude the outstanding balance of financial institutions' current accounts at the Bank of Japan (BOJ) from the calculation of leverage ratio exposures would end at the end of March 31, 2024.
The finalized amendments to the Cabinet Office Orders, Ministerial Orders, and regulatory notices raise the required level of leverage ratio from 3% to 3.15%, while excluding the outstanding balance of financial institutions' current accounts at the BOJ from the exposure measure in exceptional macroeconomic circumstances from April 2024 onwards, for the post-COVID-19 response framework.
The respective Cabinet Office Orders, Ministerial Orders, and regulatory notices will take effect on April 1, 2024.

Note:

・ For G-SIBs, an additional 0.05% would be added to the leverage buffer to compensate for the leverage buffer applicable to G-SIBs.

・ The minimum required TLAC ratio on a total leverage exposure basis will be also raised by 0.35% from 6.75% to 7.10%, after excluding the outstanding balance of financial institutions' current accounts at the BOJ.

・ Leverage ratios and total leverage exposure-based TLAC ratios shall continue to be disclosed for both the values that include and exclude the outstanding balance of financial institutions' current accounts at the BOJ.

The original press release is available in Japanese at the following URL.
https://www.fsa.go.jp/news/r4/ginkou/20230609/20230609.html open new window

Press Releases

Councils

June 12, 2023	Publication of the handouts and an outline of proceedings of the fifth meeting of "Advisory Council on Scenario Data for Climate Change Risk and Opportunity Assessment" (provisional English title) <Summary> The FSA, as a co-host member of the secretariat* of the "Advisory Council on Scenario Data for Climate Change Risk and Opportunity Assessment" (provisional English title), published the handouts and an outline of proceedings of the fifth meeting of the Advisory Council, which was held on May 17, 2023. In the fifth meeting, following a brief explanation given by a member of the Advisory Council from MEXT (Ministry of Education, Culture, Sports, Science and Technology) on the (draft) report for a summary of discussions of the Advisory Council's meetings held so far, the Advisory Council members engaged in a question-and-answer session and exchange of opinions. The secretariat of the Advisory Council* is co-hosted by the FSA, Ministry of Education, Culture, Sports, Science and Technology, Ministry of Land, Infrastructure, Transport and Tourism, and Ministry of the Environment, with representatives from the financial and non-financial sectors as Advisory Council members, and representative officials from the relevant government ministries and agencies as observers. **The Advisory Council is aimed at exchanging opinions on climate change-related data among stakeholders in the public and private sectors regarding their needs, challenges, and future directions to appropriately use climate change-related data, thereby effectively responding to climate change. The original press releases are available in Japanese at the following URLs:: https://www.fsa.go.jp/singi/scenario_data/siryou/20230517.html https://www.fsa.go.jp/singi/scenario_data/gijiyousi/20230517.html https://www.fsa.go.jp/news/r4/singi/20230614.html

June 12, 2023

Publication of the handouts and an outline of proceedings of the fifth meeting of "Advisory Council on Scenario Data for Climate Change Risk and Opportunity Assessment" (provisional English title)
<Summary>
The FSA, as a co-host member of the secretariat* of the "Advisory Council on Scenario Data for Climate Change Risk and Opportunity Assessment" (provisional English title), published the handouts and an outline of proceedings of the fifth meeting of the Advisory Council, which was held on May 17, 2023.

In the fifth meeting, following a brief explanation given by a member of the Advisory Council from MEXT (Ministry of Education, Culture, Sports, Science and Technology) on the (draft) report for a summary of discussions of the Advisory Council's meetings held so far, the Advisory Council members engaged in a question-and-answer session and exchange of opinions.

*The secretariat of the Advisory Council** is co-hosted by the FSA, Ministry of Education, Culture, Sports, Science and Technology, Ministry of Land, Infrastructure, Transport and Tourism, and Ministry of the Environment, with representatives from the financial and non-financial sectors as Advisory Council members, and representative officials from the relevant government ministries and agencies as observers.

**The Advisory Council is aimed at exchanging opinions on climate change-related data among stakeholders in the public and private sectors regarding their needs, challenges, and future directions to appropriately use climate change-related data, thereby effectively responding to climate change.

The original press releases are available in Japanese at the following URLs::
https://www.fsa.go.jp/singi/scenario_data/siryou/20230517.html open new window

https://www.fsa.go.jp/singi/scenario_data/gijiyousi/20230517.html open new window

https://www.fsa.go.jp/news/r4/singi/20230614.html open new window

Banks

June 13, 2023	Allowance methods for quasi-equity loans (using a financial technique such as DDS* [Debt for Debt Swap]) <Summary> The FSA has been encouraging financial institutions to proactively utilize quasi-equity loans (with a financial technique such as DDS [Debt for Debt Swap]), from the perspective of supporting their corporate borrowers to improve their business profitability and of encouraging their business turnaround, etc. In this context, the FSA conducted interviews with financial institutions and published a summary of key accounting practices pertaining to allowances, including those other than full allowances (fully reserved allowances), which were ascertained by the FSA through interviews with financial institutions. The FSA expects that financial institutions will proactively take initiatives to support corporate borrowers in their business enhancement, including the utilization of quasi-equity loans. DDS is a financial technique that can be used to support a corporate borrower's business turnaround, by exchanging a part of an existing corporate borrower's debt for a subordinated debt. With this technique, the subordinated debt is treated as a quasi-equity (instead of a liability) in financial accounting, which accordingly enhances the corporate borrower's loan eligibility where the corporate borrower's repayment can be suspended for a long period of time (due to the nature of subordinated debt, which ranks after other debts for repayment), thereby alleviating the borrower's cash flow shortfalls to ensure its business continuity. The original press release is available in Japanese at the following URL: https://www.fsa.go.jp/news/r4/ginkou/20230613/20230613.html

June 13, 2023

Allowance methods for quasi-equity loans (using a financial technique such as DDS* [Debt for Debt Swap])
<Summary>
The FSA has been encouraging financial institutions to proactively utilize quasi-equity loans (with a financial technique such as DDS [Debt for Debt Swap]*), from the perspective of supporting their corporate borrowers to improve their business profitability and of encouraging their business turnaround, etc.
In this context, the FSA conducted interviews with financial institutions and published a summary of key accounting practices pertaining to allowances, including those other than full allowances (fully reserved allowances), which were ascertained by the FSA through interviews with financial institutions.
The FSA expects that financial institutions will proactively take initiatives to support corporate borrowers in their business enhancement, including the utilization of quasi-equity loans.

* DDS is a financial technique that can be used to support a corporate borrower's business turnaround, by exchanging a part of an existing corporate borrower's debt for a subordinated debt. With this technique, the subordinated debt is treated as a quasi-equity (instead of a liability) in financial accounting, which accordingly enhances the corporate borrower's loan eligibility where the corporate borrower's repayment can be suspended for a long period of time (due to the nature of subordinated debt, which ranks after other debts for repayment), thereby alleviating the borrower's cash flow shortfalls to ensure its business continuity.

The original press release is available in Japanese at the following URL:
https://www.fsa.go.jp/news/r4/ginkou/20230613/20230613.html open new window

Securities

June 14, 2023	Administrative actions against Godo Kaisha honey b., and Vital Edge Inc., notifiers of specially permitted business for qualified institutional investors (SPBQII) <Summary> The Kanto Local Finance Bureau took administrative actions against Godo Kaisha honey b., and Vital Edge Inc., notifiers of specially permitted business for qualified institutional investors (SPBQII), based on facts found to be in violation of the "Financial Instruments and Exchange Act" (FIEA), such as where they failed to file the mandatory business reports (i.e. "jigyo-hokokusho" in Japanese) with the Bureau, thereby ordering the improvement* of their business operations pursuant to the FIEA. *The orders to improve their business operations include the following: - to swiftly file the mandatory business reports with the said Bureau - to formulate recurrence preventive measures, and - to develop appropriate business conduct policies and legal/regulatory compliance structures. Note: As the said entities have no English corporate names, the Romanized versions of the Japanese corporate names are stated here. Godo Kaisha (Godo Gaisha) stated in Godo Kaisha honey b. means "limited liability company," in Japanese. The original press release is available in Japanese at the following URL: https://www.fsa.go.jp/news/r4/shouken/20230614.html
June 9, 2023	Administrative action against Union Securities Advisors Co., Ltd. <Summary> The Kanto Local Finance Bureau took administrative action* against Union Securities Advisors Co., Ltd., a financial instruments intermediary service provider, ordering the revocation of the entity’s registration and the improvement of its business operations pursuant to the "Financial Instruments and Exchange Act" (FIEA). * This administrative action was taken in response to a recommendation from the SESC (Securities and Exchange Surveillance Commission) based on a result of its on-site inspection, where Union Securities Advisors Co., Ltd. was ascertained to have been offering and/or handling a private placement of interests in a group (collective) investment scheme, without proper registration as a financial instruments business operator in violation of the FIEA. The original press release is available in Japanese at the following URL: https://www.fsa.go.jp/news/r4/shouken/20230609.html

June 14, 2023

Administrative actions against Godo Kaisha honey b., and Vital Edge Inc., notifiers of specially permitted business for qualified institutional investors (SPBQII)
<Summary>
The Kanto Local Finance Bureau took administrative actions against Godo Kaisha honey b., and Vital Edge Inc., notifiers of specially permitted business for qualified institutional investors (SPBQII), based on facts found to be in violation of the "Financial Instruments and Exchange Act" (FIEA), such as where they failed to file the mandatory business reports (i.e. "jigyo-hokokusho" in Japanese) with the Bureau, thereby ordering the improvement* of their business operations pursuant to the FIEA.

*The orders to improve their business operations include the following:

- to swiftly file the mandatory business reports with the said Bureau

- to formulate recurrence preventive measures, and

- to develop appropriate business conduct policies and legal/regulatory compliance structures.

Note: As the said entities have no English corporate names, the Romanized versions of the Japanese corporate names are stated here. Godo Kaisha (Godo Gaisha) stated in Godo Kaisha honey b. means "limited liability company," in Japanese.

The original press release is available in Japanese at the following URL:
https://www.fsa.go.jp/news/r4/shouken/20230614.html open new window

June 9, 2023

Administrative action against Union Securities Advisors Co., Ltd.
<Summary>
The Kanto Local Finance Bureau took administrative action* against Union Securities Advisors Co., Ltd., a financial instruments intermediary service provider, ordering the revocation of the entity’s registration and the improvement of its business operations pursuant to the "Financial Instruments and Exchange Act" (FIEA).

* This administrative action was taken in response to a recommendation from the SESC (Securities and Exchange Surveillance Commission) based on a result of its on-site inspection, where Union Securities Advisors Co., Ltd. was ascertained to have been offering and/or handling a private placement of interests in a group (collective) investment scheme, without proper registration as a financial instruments business operator in violation of the FIEA.

The original press release is available in Japanese at the following URL:
https://www.fsa.go.jp/news/r4/shouken/20230609.html open new window

Others

June 13, 2023	Conclusion of a Basic Agreement between FSA and the University of Tokyo on Research Collaboration
June 9, 2023	Administrative action against FTX Japan, Inc. (extension of the order of retention of assets within Japan for another three months) [The Kanto Local Finance Bureau] <Summary> The Kanto Local Finance Bureau took administrative action against FTX Japan, Inc., pursuant to the "Financial Instruments and Exchange Act" (hereinafter referred to as the "FIEA"), ordering the extension of the order of retention of assets* within Japan for another three months from June 10 to September 9, 2023, upon expiration of the order for the retention of assets within Japan issued on March 9, 2023 pursuant to Article 56-3 of the FIEA. This administrative action was taken to ensure the continued protection of investors, taking into account the fact that the company is subject to Chapter 11** bankruptcy filings under the U.S. Bankruptcy Code initiated by its parent company, etc. (The order to improve its business operations, which was issued on November 10, 2022, remains in effect.) Details of the administrative action are available [only in Japanese] on the website of the Kanto Local Finance Bureau). * "Assets" in this context refer to those retained within Japan from June 10, 2023, to September 9, 2023, equal to the amount of liabilities to be recorded in the liabilities section of the entity's balance sheet (including the amount of guarantee obligations) less the amount of liabilities to non-residents as of the respective dates (unless otherwise approved by the Bureau as being in the public interest or in the interest of investor protection). ** Chapter 11 of the U.S. Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. (Source: the webpage of the U.S. Federal Courts) The original press release is available in Japanese at the following URL: https://www.fsa.go.jp/news/r4/sonota/20230609/20230609.html

June 13, 2023

Conclusion of a Basic Agreement between FSA and the University of Tokyo on Research Collaboration

June 9, 2023

Administrative action against FTX Japan, Inc. (extension of the order of retention of assets within Japan for another three months) [The Kanto Local Finance Bureau]
<Summary>
The Kanto Local Finance Bureau took administrative action against FTX Japan, Inc., pursuant to the "Financial Instruments and Exchange Act" (hereinafter referred to as the "FIEA"), ordering the extension of the order of retention of assets* within Japan for another three months from June 10 to September 9, 2023, upon expiration of the order for the retention of assets within Japan issued on March 9, 2023 pursuant to Article 56-3 of the FIEA.
This administrative action was taken to ensure the continued protection of investors, taking into account the fact that the company is subject to Chapter 11** bankruptcy filings under the U.S. Bankruptcy Code initiated by its parent company, etc. (The order to improve its business operations, which was issued on November 10, 2022, remains in effect.)
Details of the administrative action are available [only in Japanese] on the website of the Kanto Local Finance Bureau open new window

).

* "Assets" in this context refer to those retained within Japan from June 10, 2023, to September 9, 2023, equal to the amount of liabilities to be recorded in the liabilities section of the entity's balance sheet (including the amount of guarantee obligations) less the amount of liabilities to non-residents as of the respective dates (unless otherwise approved by the Bureau as being in the public interest or in the interest of investor protection).
** Chapter 11 of the U.S. Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. (Source: the webpage of the U.S. Federal Courts open new window

)

The original press release is available in Japanese at the following URL:
https://www.fsa.go.jp/news/r4/sonota/20230609/20230609.html open new window

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