JAPAN Law and Practice Contributed by: Tomoyuki Tanaka and Henry Tan, Anderson Mori & Tomotsune
Orderly Resolution Regime The orderly resolution regime was introduced by amendments to the Deposit Insurance Act in 2014. The purpose of the amendments was to implement the “Key Attributes of Effective Resolution Regimes for Financial Institutions” adopted by the FSB. Under this regime, the Prime Minister can implement certain measures to prevent serious financial turmoil. Under the orderly resolution regime, the Prime Minister may, subject to consultation with the Financial System Management Council, take the following actions for financial institutions that are not experiencing a deficit in funds. • Impose oversight of the local bank’s manage - ment by the Deposit Insurance Corporation. • Provide liquidity support to fulfil the obliga - tions of the financial institution. • Order a capital injection. For financial institutions that are experiencing a deficit in funds, the Prime Minister may: • impose oversight of the local bank’s manage - ment by the Deposit Insurance Corporation; • take over the management of the local banks’ business and assets under those circum - stances specified in the Deposit Insurance Act; • transfer contracts that are necessary to main - tain the stability of the financial system to a bridging bank; and • provide financial assistance to the bridging bank to enable the performance of its obliga - tions under those contracts. The orderly resolution regime is generally in line with the “Key Attributes of Effective Resolution Regimes for Financial Institutions”, including recovery and resolution planning, temporary
stay of early termination rights and implementa - tion of a contractual bail-in mechanism.
9. ESG 9.1 ESG Requirements
The Banking Act does not require local banks to satisfy ESG requirements. However, under the Guidelines, a listed local bank is required to comply with Japan’s Corporate Governance Code issued by the Tokyo Stock Exchange. Under the Corporate Governance Code, listed companies are required to establish a basic policy for and make disclosures regarding their sustainability initiatives. Furthermore, the FIEA was amended in 2023 to require listed companies to disclose certain sustainability-related matters in their annual securities reports and other disclosure materi - als. Accordingly, listed local banks are required, as a practical matter, to take ESG requirements into consideration in their disclosure documents. In 2022, the FSA also published “Supervisory Guidance on Climate-related Risk Management and Client Engagement”. The guidance, which was published to enhance the development of initiatives to be taken by local banks, requires the management of climate-related risks by local banks as well as the support they should provide to their clients on the climate-related risks and opportunities relating to climate change.
10. DORA 10.1 DORA Requirements
The FSA has amended the Guidelines in efforts to strengthen the cybersecurity management of local banks and, as part of these efforts, also
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