Regulatory Alerts2018-03-13
Replacing checklists with engagement
The Financial Services Agency of Japan (JFSA) is transforming its supervisory approach from a prescriptive, checklist-based "Sanctions Agency" model to one focused on engagement, dynamic supervision, and broader regulatory goals. This shift involves redefining regulatory objectives to include market vigor and national welfare, expanding perspectives to substance and future-oriented holistic analysis, and implementing three pillars: enforcement addressing root causes, continuous dynamic supervision, and promoting disclosure and engagement. To achieve this, the JFSA plans to repeal its detailed Inspection Manuals by April 2019, moving away from specifying how firms should attain goals towards principle-based guidance, aiming to foster innovation and address future risks.