This is a supervisory guidance report published by the Financial Services Agency (FSA) concerning the "Overview of Monitoring of Foreign Bank Branches and Foreign Securities Companies." Based on the business activities of foreign financial institutions operating in Japan, this report summarizes recent monitoring results regarding the establishment and operation of appropriate governance, compliance, and risk management systems.
1. Background and Purpose
In recent years, the business activities of foreign bank branches and foreign securities companies have become increasingly active in Japan. From the perspective of supporting appropriate and sound business development, the FSA has compiled items identified through recent monitoring activities, organizing and analyzing them to promote transparent financial administration.
2. Main Monitoring Targets
- Primary targets: Japan branches of foreign financial groups headquartered in the United States and Europe with large-scale operations
- Other targets: Foreign bank branches headquartered in Asia and other regions
- Comprehensive understanding of situations through analysis of various metrics
3. Key Points of Monitoring
(1) Understanding Business Models
- Analysis of business models of each Japanese branch
- Confirmation of business strategies and revenue structures
- Evaluation of positioning within the parent company group
(2) Governance System
- Establishment and operational status of governance systems appropriate to business models
- Management structure of Japan branches
- Decision-making processes and reporting lines
(3) Legal Compliance System
- Establishment and operational status of compliance systems
- Response to Japanese laws and regulations
- Implementation of internal control systems
(4) Risk Management System
- Establishment and operational status of risk management systems
- Management of credit risk, market risk, and operational risk
- Liquidity risk management systems
4. Monitoring Results
(1) Business Model Characteristics
- Diversity in business models of foreign financial institutions
- Differences in business development based on parent company strategies
- Importance of business development tailored to the Japanese market
(2) Governance Challenges
- Need to strengthen governance systems at some branches
- Importance of clarifying responsibilities between parent companies and Japan branches
- Need for appropriate allocation of management resources
(3) Compliance Issues
- Variations in understanding and response to Japanese regulations
- Need to strengthen internal audit functions
- Importance of fostering compliance culture
(4) Risk Management Status
- Differences in sophistication of risk management systems
- Need to strengthen response to emerging risks
- Importance of coordination with parent company risk management
5. Future Monitoring Direction
(1) Risk-Based Approach
- Focused monitoring based on business models and risk profiles
- Efficient and effective supervisory activities
(2) Dialogue with Financial Institutions
- Deepening understanding through close dialogue
- Support for voluntary improvements by financial institutions
(3) International Cooperation
- Strengthening cooperation with home country supervisory authorities
- Information sharing and coordinated responses
6. Expectations for Foreign Financial Institutions
(1) Strengthening Governance
- Establishment of governance systems appropriate to business models
- Clarification of management responsibilities
- Securing appropriate management resources
(2) Thorough Compliance
- Deep understanding of Japanese laws and regulations
- Establishment of effective internal control systems
- Development of compliance culture
(3) Enhancement of Risk Management
- Construction of comprehensive risk management systems
- Appropriate response to emerging risks
- Strengthening cooperation with parent companies
7. FSA Support Stance
- Support for sound business development of foreign financial institutions
- Promotion of highly transparent financial administration
- Maintenance of constructive dialogue
8. Published Materials
- Main text: "Monitoring of Foreign Bank Branches and Foreign Securities Companies" (PDF)
- Summary: "Overview of Monitoring of Foreign Bank Branches and Foreign Securities Companies" (PDF)
- Published on June 30, 2025
9. Contact Information
- Major Securities Firms Monitoring Office, Supervisory Bureau, Financial Services Agency
- Phone: 03-3506-6000 (main) Extensions 2280, 2934
10. Conclusion
This report aims to clarify the FSA's supervisory policies and issue awareness, enabling foreign financial institutions to appropriately develop their businesses in the Japanese market, and to promote highly transparent financial administration. Foreign financial institutions are expected to use this report as a reference to further strengthen their governance, compliance, and risk management systems, contributing to the sound development of the Japanese financial market.