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Financial Stability: Overcoming the Crisis and Improving the Efficiency of the Banking Sector

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  • Randall S. Jones
  • Masahiko Tsutsumi
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    Abstract

    The crisis that originated in mid-2007 in the United States and deepened in September 2008 is the largest peace-time disruption of financial markets since the Great Depression. It was triggered by a number of factors, namely the large amount of lending to subprime borrowers, the expansion of securitisation resulting in a disconnect between loan originators and final investors, the questionable assessments of credit rating agencies and the unprecedented resort to off-balance sheet vehicles. These developments took place during a traditional credit boom and reinforced the skyrocketing of asset prices, erosion of lending standards and under-pricing of risk. The crisis had serious repercussions worldwide, particularly in Europe, given the global nature of financial markets. This paper begins by considering why the Japanese banking system was initially relatively resilient to the deterioration in the global financial system, although there were some secondary effects that are discussed in the following section. The third section outlines the emergency response of the Japanese authorities to the financial crisis, including quantitative measures by the central bank and other institutions and regulatory changes by the Financial Services Agency (FSA). At the same time, the authorities have taken steps to improve the regulatory framework. The fourth section goes beyond the crisis to consider policies to boost chronically low profitability in the banking sector. Measures to promote efficiency in the financial sector by upgrading capital markets and improving the range and quality of financial products are discussed in the following section. Stabilité financière : surmonter la crise et améliorer l'efficience du secteur bancaire au Japon Les banques japonaises ont été en grande partie épargnées par les effets directs de la crise financière mondiale, grâce à leur exposition limitée aux actifs toxiques étrangers, au cadre réglementaire en place au Japon et au rôle modeste de la titrisation. Néanmoins, la forte contraction de la production et la chute des cours des actions ont indéniablement eu des répercussions préjudiciables sur le secteur bancaire. Les autorités ont réagi en prenant des mesures pour stabiliser le marché financier, injecter des capitaux dans les établissements de dépôts et préserver le crédit aux petites entreprises. Ces mesures d'urgence devraient être démantelées progressivement afin de limiter les effets de distorsion qui en découlent, une fois que la reprise sera ancrée. Il est essentiel de moderniser le cadre réglementaire en améliorant la transparence des produits titrisés, le fonctionnement des agences de notation financières et les règles relatives aux fonds propres. Il importe également de remédier à des problèmes chroniques, dont la faible rentabilité des établissements financiers, en particulier des banques régionales, et de renforcer l'efficience du secteur financier. Cela passe par diverses mesures, notamment par la privatisation des établissements financiers publics, l'amélioration de l'efficacité des services bancaires, et le renforcement de la diversité et de la qualité des produits financiers.

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    File URL: http://dx.doi.org/10.1787/220053357172
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 738.

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    Date of creation: 04 Dec 2009
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    Handle: RePEc:oec:ecoaaa:738-en

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    Keywords: Japan; financial sector; securitisation; capital injections; credit rating agencies; Bank of Japan; capital adequacy regulation; FSA; Basel II; reverse mortgages; capital markets; bank; regional banks; global financial crisis; Japanese economy; banques régionales; injections de capitaux; agences de notation financières; prêts viagers hypothécaires; Bâle II; FSA; Banque du Japon; crise financière mondiale; économie japonaise; règles relatives aux fonds propres; titrisation; banque; Japon; secteur financier; marchés de capitaux;

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