Japan’s FSA amends Basel II implementation guidelines

The Financial Services Agency (FSA) in Japan has amended guidelines for the implementation of Pillar II of the Basel Accord. The guidelines for its early warning system framework were revised to clarify and further emphasise the Agency’s approach to Pillar II. As part of Pillar II, firms will have to assess their own risk management approach.

The FSA will then assess each firm’s preparedness for risk under their individual and comprehensive risk management system. “It would be effective and efficient to utilise the existing early warning thresholds that focus on specific indicators for individual risks, as a tool to implement the second pillar of Basel II, together with the aforementioned FSA’s approach to encourage each financial institution to make its own efforts to build a comprehensive risk management system,” said the report.

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