The Deposit Insurance Act provides that the Commissioner of the Financial Services Agency may, when deeming it necessary to ensure that the provisions of the Act are implemented efficiently, authorize the DICJ to conduct on-site inspections of financial institutions.
The scope of on-site inspections that may be undertaken by the DICJ is defined in Article 137, paragraph 6 of the Deposit Insurance Act. Namely, the DICJ may conduct inspections to check that: (i) “payment of insurance premiums is being made properly” (item 1 of the same); (ii) “measures are being implemented to prepare databases, electronic data processing systems and other relevant measures for aggregating data related to deposits held by the same depositor, as obligatory to financial institutions” (item 2); and (iii) “the estimated amount to be repaid on deposits and other claims when a financial institution has failed” (item 3). Penal provisions also exist for cases including evasion of these on-site inspections (Article 143, paragraph 2 of the Deposit Insurance Act).
The DICJ began inspecting depositor’s name-based aggregation databases in August 2001 (inspection under item 2) and is effectively and efficiently undertaking the inspections in order to ensure and improve the accuracy of the depositor data.
In addition to the inspection of depositor’s name-based aggregation databases, the DICJ expanded its inspections to include insurance premiums confirmation (inspection under item 1) in January 2003. As the adequate payment of insurance premiums is indispensable for the stable operation of the deposit insurance system, the DICJ is striving, through its inspections, to ensure that premium payments are being made properly and that fairness is maintained among financial institutions as the payer of insurance premiums. Regarding the calculation of the “estimated proceeds payment rate” (inspection under item 3), the DICJ is prepared, if necessary, to undertake the inspection in order for a failed financial institution to properly pay the estimated proceeds in the event that a failure occurs.
To enhance the quality of these inspections, the DICJ established its Inspection Department in July 2003 and has been taking appropriate measures to create a system under which inspections can be properly performed.