banking

FSA Meetings with Industry Associations during June 2025

Norbert Gehrke

17 Aug 2025 — 5 min read

The Financial Services Agency (FSA) held a series of meetings with Japan's financial industry associations, outlining its key priorities and concerns. The discussions reveal a strong focus on enhancing governance, strengthening cybersecurity, and ensuring customer-centric operations across the entire financial system.

I. Common Points Raised Across Associations

Several key themes were consistently raised by the FSA in meetings with nearly all associations, indicating agency-wide priorities:

Strengthening Cybersecurity

Countermeasures for Unauthorized Access: A universal demand to urgently enhance security against phishing, malware, and other forms of unauthorized access to customer accounts, with a strong push for mandatory multi-factor authentication (MFA).
Transition to Post-Quantum Cryptography (PQC): The FSA stressed the need for all financial institutions to begin immediate preparations for the transition to PQC to protect against future threats from quantum computers. Institutions were told not to delay and to start creating roadmaps with their IT vendors.
Abolishing Password-Protected ZIP Files: The FSA explicitly called for an end to the "undesirable" and insecure practice of sending password-protected files via email, citing risks of malware infection and urging the use of secure alternatives like encrypted communication channels or secure online storage.

Anti-Money Laundering (AML) / Countering the Financing of Terrorism (CFT)

All institutions are required to conduct an "effectiveness verification" of their AML/CFT measures and be able to explain the results rationally and objectively, particularly in anticipation of the 5th FATF Mutual Evaluation.
The FSA urged institutions to review and update their practices based on the revised "Reference Cases of Suspicious Transactions" to better detect and report illicit activities.

Enhancing Internal Audits

The FSA highlighted its "Discussion Group on Enhancing Internal Audits" and announced an upcoming report in June 2025. All associations were instructed to use this report as a guide to significantly improve the level and effectiveness of their internal audit functions.

Promoting Responsible Use of AI

The FSA promoted its "AI Public-Private Forum," which held its first meeting on June 18, 2025. It encouraged active participation from all sectors to share best practices and address challenges in leveraging AI for customer benefit and operational efficiency while managing risks.

International Financial Topics (G7 Meeting)

The key outcomes of the May 2025 G7 Finance Ministers' and Central Bank Governors' Meeting were shared, covering topics such as financial stability, risks from non-bank financial intermediaries (NBFI), the benefits and risks of AI, and strengthening responses to cyber risks and financial crime.

Promotion of Japan Fintech Week

The FSA reported on the success of Japan Fintech Week 2025 and requested continued cooperation and participation for the 2026 event to foster innovation and business opportunities.

II. Association-Specific Key Points

Beyond the common themes, the FSA raised specific issues tailored to the business environment and recent events of each sector.

1. General Insurance Association of Japan (日本損害保険協会)

Supervisory Guideline Revision: Directly addressing recent scandals involving fraudulent insurance claims and premium adjustments, the FSA emphasized the need for strict implementation of the revised guidelines. Key areas include ensuring the effectiveness of insurer guidance to agencies, preventing excessive provision of benefits, and enhancing information management systems.
Natural Disaster Risk Management: While noting improved loss ratios, the FSA urged insurers to provide clear and thorough explanations to customers regarding premium increases driven by the rising frequency and severity of natural disasters.
Developing Complementary Private Insurance: Encouraged the development of private insurance products that complement public insurance, specifically mentioning coverage for uninsured medical treatments as part of the government's "New Capitalism" initiative.

2. Japan Crypto Asset Business Association (日本暗号資産等取引業協会)

Response to Unauthorized Outflows: The FSA explicitly referenced the May 2024 hack by the "TraderTraitor" group, urging the industry to learn from the incident, conduct thorough self-inspections, and promptly implement revised self-regulatory rules to prevent recurrence.
Curbing Use for Fraud and Online Casinos: Demanded that member firms strengthen transaction monitoring and halt transfers identified as being related to fraud or illegal online casinos, in line with the government's "Comprehensive Measures 2.0."
Oversight of Stablecoins: With the first registration of stablecoin intermediaries in March 2025, the FSA underscored the association's critical self-regulatory role in ensuring their proper and safe operation.
System Stability: Expressed concern over frequent system failures during upgrades and Initial Exchange Offerings (IEOs), urging firms to prioritize risk management over business expansion.

3. Life Insurance Association of Japan (生命保険協会)

Application of Revised Supervisory Guidelines: Although the originating scandals were in the general insurance sector, the FSA urged life insurers to apply the lessons and revised guidelines to ensure customer-centric operations and robust governance.
Adoption of Asset Owner Principles: The FSA noted that 24 companies (representing 93% of industry assets) have adopted the principles. It requested the remaining 17 companies to explain their reasons if they choose not to adopt them, signaling a push for greater accountability in asset management.

4. Major Banks (主要行等)

Specific Risk Governance Concerns: Following its 2024 monitoring, the FSA highlighted key risk areas for major banks: managing the expansion of overseas fund businesses, risk control for domestic LBO loans, detecting accounting fraud ("powdered dressing"), and managing interest rate risk in the new rate environment.
Promotion of My Number Card: The FSA specifically requested that banks give the My Number Card priority placement over other forms of ID in their account-opening apps and procedures to help accelerate its adoption.

5. Regional Banks Associations (全国地方銀行協会・第二地方銀行協会)

"Regional Financial Strength Enhancement Plan": The FSA announced its intention to formulate a new plan to bolster the role of regional banks in their local economies. This includes a review of the capital injection system and monitoring frameworks.
Monitoring of Structured Loans (仕組貸出): The FSA reiterated its strong concern about the increasing trend of structured loans, which are often used to compensate for a decline in core lending. It flagged inadequate risk management, poor disclosure, and a lack of proper cost-return analysis as key problems.
Law on Security Interests: Highlighted the passage of a new law regarding security interests on movable property and claims, urging regional banks to actively use it to diversify funding sources for businesses.

6. National Central Society of Credit Cooperatives (全国信用組合中央協会)

Addressing Internal Scandals: The FSA expressed grave concern over a series of scandals at individual credit cooperatives, emphasizing that such incidents erode trust in the entire sector. It demanded that management take the lead in strengthening governance and compliance.
Support for Businesses Affected by US Tariffs: The FSA urged credit cooperatives to provide thorough and fine-tuned financial support to local businesses impacted by U.S. tariff measures, including setting up consultation desks.
Preventing Payments to Online Casinos: Issued a direct request for members to strengthen systems to prevent their services from being used for illegal online gambling activities.