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Banking Crises and the Japanese Legal Framework

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  • Ignacio Tirado

    (Professor, Universidad Autónoma de Madrid, Spain (E-mail: ignacio.tirado@uam.es))

Abstract

This paper presents an overview of the Japanese system to deal with the distress of banks, providing a classification of the regulation and remedies based on the level of systemic risk of the troubled entity. The paper differentiates between the types of actions available and analyses in detail the instruments and their application. While the regulation is disperse and its apprehension is complicated for a foreign reader, Japan counts on a modern, thorough and adequate group of institutions and instruments to tackle bank distress. Its most notable feature is the proportionality of measures and the flexibility enjoyed by a resolution authority that may accommodate its intervention to the characteristics of the case and the degree of contagion risk. Although mainly inspired by the American model, the system is compared with the new European framework and FSB recommendations are considered. Although a few elements could be reconsidered, its high institutional level and flexibility make the Japanese system one capable of dealing with financial crises at both national and international levels.

Suggested Citation

  • Ignacio Tirado, 2017. "Banking Crises and the Japanese Legal Framework," IMES Discussion Paper Series 17-E-02, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:17-e-02
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    File URL: http://www.imes.boj.or.jp/research/papers/english/17-E-02.pdf
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    References listed on IDEAS

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    1. Takeo Hoshi & Anil Kashyap, 2000. "The Japanese Banking Crisis: Where Did It Come From and How Will It End?," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 129-212, National Bureau of Economic Research, Inc.
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    3. Kimie Harada & Takeo Hoshi & Masami Imai & Satoshi Koibuchi & Ayako Yasuda, 2015. "Japan’s financial regulatory responses to the global financial crisis," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 7(1), pages 51-67, April.
    4. International Monetary Fund, 2012. "Japan: Financial Sector Stability Assessment Update," IMF Staff Country Reports 2012/210, International Monetary Fund.
    5. Kimie Harada & Takatoshi Ito & Shuhei Takahashi, 2010. "Is the Distance to Default a Good Measure in Predicting Bank Failures? Case Studies," NBER Working Papers 16182, National Bureau of Economic Research, Inc.
    6. Hiroshi Nakaso, 2001. "The financial crisis in Japan during the 1990s: how the Bank of Japan responded and the lessons learnt," BIS Papers, Bank for International Settlements, number 06.
    7. Yuichiro Ito & Tomiyuki Kitamura & Koji Nakamura & Takashi Nakazawa, 2014. "New Financial Activity Indexes: Early Warning System for Financial Imbalances in Japan," Bank of Japan Working Paper Series 14-E-7, Bank of Japan.
    8. Mr. Amadou N Sy & Mr. Jorge A Chan-Lau, 2006. "Distance-to-Default in Banking: A Bridge Too Far?," IMF Working Papers 2006/215, International Monetary Fund.
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    Cited by:

    1. Grund, Sebastian & Nomm, Nele & Walch, Florian, 2020. "Liquidity in resolution: comparing frameworks for liquidity provision across jurisdictions," Occasional Paper Series 251, European Central Bank.

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    More about this item

    Keywords

    Bank Resolution; Financial Crisis; Preventive Corrective Action; General Bankruptcy Proceedings; Systemic Risk;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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