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Research Handbook on Crisis Management in the Banking Sector

Research Handbook on Crisis Management in the Banking Sector

Research Handbooks in Financial Law series

Edited by Matthias Haentjens and Bob Wessels

In this timely Handbook, over 30 prominent academics, practitioners and regulators from across the globe provide in-depth insights into an area of law that the recent global financial crisis has placed in the spotlight: bank insolvency law.

Chapter 21: Japan: Regulatory development of the banking resolution regime

Tomoaki Hayashi

Subjects: economics and finance, financial economics and regulation, money and banking, law - academic, company and insolvency law, finance and banking law


The current Japanese resolution regime has evolved in response to financial crises such as the Japanese crisis in the 1990s and the global financial crisis beginning in 2007. Prior to the Japanese crisis in the 1990s, a resolution regime for crisis management did not exist in Japan. During this crisis, there were more than 100 failures of deposit-taking Institutions such as banks and credit cooperatives. To deal with such a serious crisis, Japan developed and implemented crisis management measures including capital injections into banks with the use of public funds and temporary nationalization of banks. These measures taken during the crisis were reorganized by the amendment of the Deposit Insurance Act in 2000 which provides the framework of crisis management measures for Japan’s systemically important banks. Reflecting on the experience of the Japanese financial crisis, even before the global financial crisis, Japan had developed a robust and time-tested resolution regime for the banking sector. The global financial crisis that unfolded after the Lehman Brothers shock triggered the global discussion to address the ‘Too Big To Fail’ issue. At the Cannes Summit in 2011, the G20 leaders agreed on a framework to address this issue. One of the key features of the framework is the ‘Key Attributes of Effective Resolution for Financial Institutions’ (‘Key Attributes’) which set out the core elements of an effective resolution regime for Systemically Important Financial Institutions (‘SIFIs’).

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