Checklist Compliance Under Review
The Financial Services Agency in January published a draft report on how it intends to transform its supervisory approach to be more holistic and forward-looking and to minimize the current “checklist” approach. The FSA explained that its existing supervisory approaches may lead supervisors and financial institutions "to split hairs while ignoring the elephant in the room" and may have discouraged firms from innovating.
Proposed changes include:
- Focusing enforcement on overall effectiveness rather than on item-by-item compliance checks
- Focusing on firm-wide priority areas rather than checking every item on common checklists
- Shifting from periodic on-site inspections to continuous and seamless monitoring
- Engaging with a broader range of stakeholders
- Restructuring the internal FSA organization.
The FSA added that it intends to continue talking with consumers, financial institutions, market participants and other stakeholders even after the consultation period on the draft report ends, and will continuously update the report and enhance its supervisory approaches based on "lessons learned" as it goes forward.
