III Focal Points related to the Administration of Supervision
III-1-1 Cooperation within Supervisory Departments
When conducting the supervision of financial conglomerates, it is necessary for the departments with authorities to supervise a management company and group financial companies to appropriately exchange information and try to share the presence of risks and an awareness of problems as a group which cannot be identified with the supervision of single businesses. To this end, cooperation among the departments responsible for the supervision of a management company and group financial institutions and among such departments and the Conglomerate Office shall be strengthened by an adequate and appropriate exchange of information and an active exchange of opinions.
Especially, the departments contemplating to impose improvement orders or other strict supervisory measures on a management company or one of the group financial institutions shall pay attention to the cooperation with the Conglomerate Office and other departments responsible for supervising other group companies.
III-1-2 Cooperation with Inspection Departments
It is important for supervisory departments and inspection departments (including the Securities and Exchange Surveillance Commission when securities firms are included in financial conglomerates) to properly cooperate with one another while maintaining their own independence and to achieve highly effective financial conglomerate supervision by properly combine both onsite and offsite monitoring techniques. To this end, supervisory departments shall pay adequate attention to the following points regarding the cooperation with inspection departments.
(1)Supervisory departments shall follow up on improvements concerning the issues identified by inspections about financial conglomerates, and issue business improvement orders or otherwise take strict, supervisory measures as may be required to correct the issues. Specifically, for example,
- Based on the notification of inspection results and in accordance with the necessity of supervising financial conglomerates, supervisory departments shall request a management company or group companies to submit a report consisting of confirmation of facts, analysis of causes, measures for improvement and coping with the situation and other items.
- When the report of item a. above is submitted, conduct adequate hearings of a management company or group financial institutions. When conducting such hearings, closely cooperation with inspection departments shall be ensured.
- When it is deemed that it will take a certain period of time to achieve the improvement of the system for the compliance of laws and regulation or the risk management system, periodic reports pending the next inspection shall be requested.
(2)The issues of the group identified by supervisory departments though offsite monitoring shall be fed back to inspection departments so that they can be utilized in the next inspection.
Specifically, supervisory departments (in the case of inspections by Local Finance Bureaus, Financial Supervisory Divisions of Local Finance Bureaus, and in the case of inspections by the Inspection Bureau of the Financial Services Agency or the Securities and Exchange Surveillance Commission, the Conglomerate Office of the Supervisory Bureau) shall brief inspection departments on the current status of financial conglomerates concerning the following points.
- Major developments (business alliances, capital increases, change of management) after the previous inspection up to such point of time.
- With respect to groups planning to effect systems integrations associated with mergers and other reorganizations, schedules of such business reorganizations.
- Results of analysis concerning most-recent consolidated closing of accounts.
- Results of analysis concerning off-site monitoring related to risk information.
- Results of hearings.
- Supervisory measures taken against a management company or group companies (request of reporting, administrative actions) and the status of follow-up action.
- Items deemed to be emphasized in inspections from the viewpoints of supervising conglomerates.
III-1-3 Joint Meetings of Supervisory and Inspection Departments
In order to achieve highly effective supervision of financial conglomerate, joint meetings of the Supervisory Bureau, Inspection Bureau and Secretariat of the Securities and Exchange Surveillance Commission shall be held. These meetings shall be normally held at the beginning of each administrative year and from time to time as may be required.
In these meetings, opinions concerning the issues related to the inspection and supervision of financial conglomerates and other matters as may be necessary shall be exchange.
III-1-4 Cooperation with Foreign Supervisory Authorities
Information which will be helpful for the supervision of financial conglomerates by foreign authorities will be supplied to foreign supervisory authorities and they will be actively approached for exchange of opinions. Specifically, the following measures will be taken to ensure cooperation with them.
(1)When a management company is an entity incorporated under the laws and regulations of Japan.
In cases where the management company of a financial conglomerate engaged in global activities is an entity incorporated under the laws and regulations of Japan and have overseas offices, the following measures will be taken to ensure cooperation with foreign supervisory authorities.
When inquiries about permits and licenses concerning the opening of overseas are received from foreign authorities, positive and appropriate responses will be made.
When requested by foreign authorities to provide information, information concerning the financial soundness and operational appropriateness of the management company or the group will be provided actively.
Efforts will be made to inform foreign, local authorities of conglomerate supervision policies which may have a material effect on the operations of overseas offices. Furthermore, efforts will be made to conduct prior consultations with foreign, local authorities when taking measures which may have an effect on overseas offices.
(2)When a management company is a foreign holding company, etc.
When the management company of a financial conglomerate engaged in global activities is a foreign holding company, etc. and have offices in Japan, the following measures will be taken to ensure cooperation with foreign supervisory authorities.
When permits and license concerning the opening of offices in Japan of the financial conglomerates are to be granted, efforts will be made to obtain the consent of the foreign authorities of the places where the management company is located. When positive responses are not obtained from foreign authorities or their responses are not satisfactory, such permits or licenses shall be refused or granted subject to certain conditions, as necessary.
When issues related to financial conglomerates supervision, which are deemed necessary to be reported to foreign authorities, are identified or when it is found out that incorrect information is conveyed from domestic offices in Japan to the management company, active contact with foreign authorities shall be encouraged.
When it is deemed to be necessary to take certain remedial measures concerning supervisory focal points contained in this Supervision Guideline against management companies located overseas, efforts shall be made to contact foreign supervisory authorities in advance and work in cooperation with them.
When administrative actions are to be taken against group companies located in Japan, efforts shall be made to exchange information with foreign supervisory authorities and promote cooperation.
When domestic offices in Japan are not subject to consolidated audits by foreign authorities, such domestic offices in Japan shall be strictly inspected and supervised by the FSA as local supervising authorities.
When it is requested by a managing company which has recognized that disadvantageous measures are likely to be taken to hold a meeting for exchanging opinions between the senior members of the supervisory authorities (Note 1) and the senior members of such management company (Note 2) during the process of hearings concerning the request of reports, and the supervisory authorities are going to take disadvantageous measures involving the granting of an opportunity of hearings or making explanations, unless it is necessary to take emergency measures, an opportunity for an exchange of opinions concerning the facts which constitute the cause of such disadvantageous measures to be taken and their seriousness prior to make a notification of holding hearings or granting an opportunity of making explanations.
(Note 1) Senior members of supervisory authorities include the chiefs of divisions in charge at the Financial Services Agency and Local Finance Bureaus
(Note 2) Requests from a management company shall be limited to those made from the time when supervisory authorities have received a legal report concerning the cause of such disadvantageous measures and to the time when a notification of hearings or a notification of granting an opportunity of making explanations is made.
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