Japan

The Banking Act sets out a strict prudential regime to promote financial stability and protection for depositors and control of credit systems. According to its statutory provisions, no person may conduct the business of core banking that involves accepting deposits and lending money or providing transfers of money without being granted a bank license by the Prime Minister through the FSA. The legislation provides strict capital adequacy ratios according to global Basel III norms, corporate governance standards, accounting disclosures, and prohibits banks from conducting unapproved speculation in the form of secondary businesses. Moreover, it empowers the FSA to have strong regulatory powers to mandate internal audits, on-site examinations, enforceable Business Improvement Orders, or even cancel the banking licenses of institutions altogether to avoid macro-prudential risks to the system.