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The Japan Securities Dealers Association is concerned that uniform regulations excessively focused on capital requirements without proper consideration of such differences among jurisdictions may lead to skewed risk-taking incentives and impair the stability of real economies and financial markets.
“Japanese or other financial institutions which were following risk management strategies different from those of US/European institutions”, the JSDA underlines, noting that these institutions were relatively less affected by the recent financial crisis. “Excessively tight regulations on market transactions may create a vicious circle whereby a decrease in market liquidity leads to further declines”, JSDA warns.
Furthermore, the JSDA which is also functioning as a self-regulatory organization in the Japanese securities market, critically underlines that the consultative proposals have not yet suggested specific measures to help dampen ‘pro-cyclicality’ at this stage. Nor are specific measures regarding ‘contingent capital’ available, and the results of a ‘Quantitative Impact Study’ are yet not on the table. Therefore, JSDA calls on the BIS to extend the comment period on the proposal.
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