On-Site Inspections

On-site inspections conducted by the Deposit Insurance Corporation of Japan (DICJ) are classified into “inspections based on the Deposit Insurance Act,” which examine the payment of insurance premiums, and “inspections based on the Act on Damage Recovery Benefit Distributed from Fund in Bank Accounts Used for Crimes (Criminal Accounts Damage Recovery Act),” which examine the procedures for damage recovery benefits.
The Deposit Insurance Act stipulates that the Commissioner of the Financial Services Agency may authorize the DICJ to conduct on-site inspection of a financial institution when the Commissioner deems the inspection to be necessary in order to ensure smooth enforcement of the Act.
The scope of on-site inspections that may be undertaken by the DICJ based on the Deposit Insurance Act is defined in Article 137, paragraph (6) of the same act. Under this provision, the DICJ may conduct inspections in order to check (1) whether the payment of insurance premiums is being made properly (Item (ⅰ) of the said provision); (2) whether financial institutions are implementing maintenance of the name-based aggregation databases and systems as required (Item (ⅱ)); and (3) the estimated amount of deposits and other claims to be repaid in the event of the failure of a financial institution (item (ⅲ)). There are penal provisions concerning refusal of on-site inspection and other inappropriate acts (Article 143, paragraph (2) of the Deposit Insurance Act).
Since August 2001, the DICJ has been implementing inspections under Item (ii), “the name-based aggregation of deposits, etc.” Also, Article 58-3, paragraph (1) of the Deposit Insurance Act was revised in May 2011 and enforced in May 2012 (including the Ordinance of the Cabinet Office on the measures provided in Article 58-3, paragraph (1) of the Deposit Insurance Act). In order to comply with this revision, the DICJ changed the inspection policy so as to focus not only on the status of maintenance of the name-based aggregation databases of depositors, but also the status of “separate management of insured and uninsured deposits; development of systems for preparing data on changes in deposits, etc. (detailed statement files on deposits and withdrawals); and preparation for offsetting of deposits against loans and purchase of deposits and other claims (estimated proceeds payment) (preparation of procedures and manuals, etc.).
In addition, the DICJ has conducted inspections under Item (i), “Payment of insurance premiums,” since January 2003. As appropriate payment of insurance premiums is indispensable for the stable operation of the deposit insurance system, the DICJ is striving to ensure that premium payments are being made properly so as to maintain equality among financial institutions as payers of insurance premiums. Regarding the inspection under item (iii), “Calculation of the estimated proceeds payment rate,” the DICJ is prepared to conduct inspections when necessary in order to ensure that financial institutions properly pay the estimated proceeds in the event of their failure.
The Criminal Accounts Damage Recovery Act stipulates that an administrative agency may authorize the DICJ to conduct on-site inspection of a financial institution in accordance with the procedures specified by the provisions of Chapters 3 and 4 (Articles 4 to 25) when the agency deems the inspection to be necessary in order to ensure smooth enforcement of the Act.
The scope of on-site inspections that may be undertaken by the DICJ based on the Criminal Accounts Damage Recovery Act is defined in Article 36, paragraph (6) of the same act. Under this provision, the DICJ may conduct inspections in order to check (1) the procedures for the extinction of claims on deposits, etc. (Chapter 3) and (2) the procedures for the payment of damage recovery benefits (Chapter 4). There are also penal provisions concerning refusal of on-site inspection and other inappropriate acts (Article 43, paragraph (2) of the Criminal Accounts Damage Recovery Act).
Since establishing the Inspection Department in July 2003, the DICJ has been striving to improve the system to appropriately conduct inspections in line with the expansion of the scope of inspections.

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