Japan's financial regulator is considering tightening inspections in the wake of scandals
Japan's Financial Services Agency is considering establishing a new office to coordinate inspections of financial institutions. This comes after a series of scandals at regional credit unions, The Japan Times reports, citing sources.
The agency plans to include the costs of operating the unit in its budget request for fiscal year 2027, which begins in April 2027. The inspection planning office will be responsible for reviewing and improving inspection methods, conducting medium- and long-term staff training, and identifying areas for enhanced inspections.
The government’s financial strategy to promote investment in growth, released last month, calls for strengthening inspection and oversight functions for regional financial institutions. The agency is also considering assigning specialized inspectors to regional financial bureaus across the country.
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In 2018, the Financial Services Agency dissolved the Inspection Bureau, which had played a significant role in resolving the non-performing loan crisis in the banking sector following the collapse of the Japanese economic bubble in the early 1990s. After that, the agency shifted its focus to improving the profitability of financial institutions.
Recently, violations have been uncovered at shin’yu kumiai cooperatives, also known as shinkumi banks. According to The Japan Times, it was found that Iwaki Shinkumi Bank in Fukushima Prefecture had provided funds to antisocial forces, while the former head of Uri Shinkumi Bank in Hokkaido had embezzled deposits. In both cases, orders were issued to partially suspend operations.
