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The Financial Services Agency Japan has drafted the partial amendment to the Guidelines for Financial Instruments Business Supervision.
The FSA plans to add new supervisory checkpoints to the Guidelines in order to act against illegally unregistered firms. On the basis of the experiences of the subprime loan problem and the recent failures of financial instruments firms, the FSA also plans to introduce an early-warning system with regard to the supervision of the financial instruments business.
The problems with subprime loans have also made market participants aware of the complexity that securitised products carry with the risks of the underlying assets being widely diversified and the risk of the securitised product itself being unclear. The FSA plans to create new supervisory checkpoints in the part of ''the preparedness for explaining about securitized products'' of the first and second financial instruments firms in the Guidelines.
Finally, the FSA will create new supervisory checkpoints for the risk management system of the OTC derivatives transaction firms based on the recent failure cases of the foreign exchange trading business firms and the result of the general survey conducted after the cases.
Deadline for comments is