Japan: Financial Sector Assessment Program-Technical Note on Financial Safety Net and Crisis Readiness

International Monetary Fund

No 2024/115, IMF Staff Country Reports from International Monetary Fund

Abstract: This technical note discusses Financial Safety Net and Crisis Readiness for the Japan Financial Sector Assessment Program. Better-structured crisis readiness efforts are needed to ensure that the financial authorities can deliver prompt and effective resolution outcomes. The resolution framework should be further strengthened along several other dimensions. More banks should be subjected to Recovery and Resolution Planning, supported by comprehensive planning guidance. Staffing resources and decision-making structures should be commensurate with further enhancements in the crisis readiness framework and the need to manage bank resolutions in an increasingly complex financial system. Many aspects of the emergency liquidity assistance (ELA) practices at the Bank of Japan (BOJ) are robust, but some components of the ELA framework could be improved. Finally, the BOJ should consider expanding ELA eligibility to systemically important non-bank financial institutions, prioritizing central counterparties given their pivotal role in ensuring the stability and efficiency of financial markets.

Keywords: crisis READINESS; FSAP finding; financial support; context of the Financial Sector Assessment Program; Japan securities clearing corporation; crisis simulation exercise; Financial stability assessment; Lender of last resort; Bank resolution framework; Crisis management; Financial sector stability; Global (search for similar items in EconPapers)
Pages: 30
Date: 2024-05-13
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