FSA Meetings with Industry Associations during July 2025
The Financial Services Agency (FSA) reported on its meetings held with Japan's financial industry associations during July 2025, outlining its key priorities and concerns.
I. Common Points Raised Across Associations
These topics were consistently raised by the FSA in meetings with the life insurance, general insurance, securities, trust, major bank, regional bank, and shinkin bank associations.
Review of the FSA's Supervision and Inspection System
The FSA is reorganizing its supervisory structure effective July 2025. Key changes include integrating the monitoring of cross-sectoral themes like conduct risk and cybersecurity under the Supervision Bureau. For financial groups active across multiple sectors (e.g., banking and securities), supervision will be consolidated under a single deputy commissioner-general to ensure a more holistic and effective oversight.
"Progress Report 2025 on the Advancement of Asset Management Services"
The FSA discussed its June 2025 report, which highlighted several key issues, particularly concerning Defined Contribution (DC) and Defined Benefit (DB) pension plans. The FSA expressed concern that:
- A high percentage of DC plan members invest solely in principal-protected products, which is inadequate amid rising inflation.
- Roughly half of all DC plan providers are operating at a loss, potentially creating a conflict of interest where their reliance on trust fees from investment products could lead to suboptimal product recommendations for clients. The FSA urged all institutions to improve investor education, review product lineups, and examine their fee structures.
Strengthening Cybersecurity and IT Resilience
Following the publication of its "Analysis Report on IT Resilience in the Financial Sector," the FSA stressed the growing threat of IT and cyber risks. It called on all financial institutions to treat these as top-level management risks and strengthen measures against unauthorized account access, including enhancing login authentication, anti-phishing/spoofing defenses, transaction monitoring, and inter-institutional information sharing.
Enhancing Anti-Money Laundering/Counter-Financing of Terrorism (AML/CFT) Measures
With the deadline for establishing robust systems having passed in March 2024 and the 5th FATF Mutual Evaluation approaching, the FSA is shifting its focus from basic implementation to "effectiveness verification." It urged institutions to use its latest reports to enhance their AML/CFT frameworks.
Revision of AML Rules for Non-Face-to-Face KYC
The FSA highlighted the June 2025 rule change that will make the Public Personal Authentication Service of the My Number Card the primary method for non-face-to-face Know Your Customer (KYC) procedures, phasing out higher-risk methods. Although the effective date is April 1, 2027, the FSA strongly urged institutions to implement these changes as soon as possible.
Sustainable Finance and Climate-Related Risks
The FSA emphasized the importance of climate risk management and sustainable finance. It encouraged institutions to review its "Trends and Issues" report on climate initiatives and participate in the public consultation for a "Common Carbon Credit Data Model" to improve market transparency and function. The FSA also promoted participation in the "Impact Consortium" to advance impact investing.
FSA's AI Public-Private Forum
The FSA reported on its first AI Forum held in June 2025, which aimed to share use cases and identify challenges. It strongly encouraged active participation from all sectors to help shape the agenda for future sessions.
Implementation of Government Economic Policies
The FSA noted its commitment to implementing key government policies, including the enhancement of NISA, corporate governance reform, and support for startups, to foster an environment where Japan is a leading asset management center.
Financial Measures for Natural Disasters
The FSA requested that all institutions provide flexible and thorough support to customers affected by the recent Tokara Islands earthquake and Typhoon No. 8.
Association-Specific Discussion Points
These items were raised with specific industry groups in addition to the common themes above.
Life and General Insurance Associations
- Economic Value-based Solvency Regulation (ESR): The FSA expressed its gratitude for the extensive cooperation from the insurance industry in developing the new ESR framework. With the regulations scheduled for official promulgation and application from the March 2026 period, the FSA thanked the associations for their significant contributions.
Life Insurance Association
- Monitoring of Life Reinsurance: While acknowledging reinsurance as a powerful financial and risk management tool, the FSA noted international concerns about counterparty and concentration risks. It requested that life insurers work to enhance their management of these risks.
General Insurance Association
- Response to Recent Inappropriate Practices: The FSA expressed strong regret over the series of misconduct cases in the industry (including premium adjustment, fraudulent insurance claims, and information leaks). It stated that the repeated issuance of business improvement orders was extremely regrettable and demanded that the industry take these orders seriously and implement fundamental reforms to restore public trust.
- 2nd Round of Climate Risk Scenario Analysis: The FSA acknowledged the cooperation of 19 general insurance companies in its second scenario analysis and announced the publication of the results.
Banking Associations (Major Banks, Regional Banks, Shinkin Banks)
- Progress on Managerial Guarantee Reform: The FSA noted positive progress, with 52.9% of new loans now being made without personal guarantees from business owners, and a 99.4% rate of proper explanation and documentation for loans that still require them. It urged banks to continue these efforts to establish lending practices that do not rely on personal guarantees.
- Human Resource Matching for SMEs (REVICareer): The FSA highlighted the importance of matching skilled personnel from large corporations with regional small and medium-sized enterprises (SMEs). It noted the government's goal to register 10,000 such individuals by FY2027 and asked for the banks' continued cooperation in promoting the "REVICareer" platform.
- Facilitating Financial Services for Foreigners on Startup Visas: The FSA reported that its follow-up survey found instances where foreign entrepreneurs on startup visas still faced difficulties opening bank accounts. It reiterated its request for financial institutions to ensure their front-line staff are aware of the proper procedures to provide smooth service.
Trust Companies Association
- Discontinuing the Use of Password-Protected ZIP Files: The FSA specifically criticized the continued practice of sending password-protected ZIP files via email, calling it an insecure method that prevents recipient-side security scans and exposes firms to malware risks like Emotet. It stated that this practice should be stopped and replaced with more secure methods like encrypted cloud storage.
Norbert Gehrke
