Aggregated News From Investment Management Regulators

Press Conference by the Minister for Financial Services (October 20, 2020)

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[Questions and answers:]

Q. Following the system breakdown on the 1st of this month, the Tokyo Stock Exchange (TSE) submitted a report to the Financial Services Agency (FSA) that featured measures to prevent recurrences. That report listed a flaw in a manual among the background factors that led to the backup functions failing to work properly, and it also highlighted issues with the internal management system. Please give us your assessment of the report’s content and tell us what steps the FSA will be taking.
A. On October 16, the TSE submit a report to the FSA, which we had requested. We are now carefully scrutinizing the details of the measures designed to prevent recurrences, and we will be devising appropriate administrative responses in light of those details from the perspective of making doubly sure of no future recurrences. No matter how you look at it, though, it is strange that the backup system did not work at all.
Q. I would like to ask a related question about this system failure at TSE. You said just now that the FSA is carefully examining the report submitted by the TSE, but the morning editions of various newspapers today mentioned the possibility that the report might be found wanting and on-site inspections and interviews might be conducted. What is your view of the situation at present?
A. Until I see the details being scrutinized, I cannot comment on it.
Q. It appears that capital shortages could push an increasing number of companies to seek out funds of a capital nature from the government or the private sector, so please give us a few words on what conditions the government would require when providing assistance and what corporate efforts you would be asking of these companies.
A. In talking about injecting capital, one has to be very, very careful because of conc
erns about nationalization, and extreme examples make it easy to understand these concerns. On the other hand, though, a deterioration of capital would let liabilities exceed assets, producing a net capital deficiency and making it difficult for companies to receive financial assistance from financial institutions, basically meaning that those companies would go bankrupt. There are a variety of approaches such as subordinated loans available, and I do believe there could be cases in which we must consider such inputs of capital, but this would not be a matter of blindly extending subordinate loans to everyone.

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Regulator Information

Abbreviation: FSA
Jurisdiction: Japan

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