QuestionWhat are the frameworks and initiatives for the Bank's business continuity arrangements?
As the central bank of Japan, the Bank conducts business operations in order to fulfill its mission of maintaining the stability of prices and the financial system. If such operations are ever disrupted by disasters, Japan's financial systems, as well as the payment and settlement systems, and ultimately the lives of the citizenry, will severely suffer. Therefore, the Bank is required under the relevant laws and regulations described below to continue operations even at times of disaster.
The Bank considers possible threats to its business continuity, such as disasters, and continues to work on developing a business continuity plan (BCP) so that it can properly fulfill its role as the central bank, even in the event that these threats materialize.
Moreover, in order to maintain the functioning of the financial and settlement systems of the country, it is important not only for the Bank, but also for market participants, such as private financial institutions, to develop their business continuity arrangements. The Bank has been supporting the development of market-wide business continuity arrangements, including those of private financial institutions.
In order to contribute to the business continuity of the entire country at times of disaster, the Bank has been exchanging opinions with relative administrative institutions on a daily basis about measures to maintain the functioning of the financial and settlement systems.
Potential Threats and Damage Scenarios
There is a wide range of potential threats that could disrupt the Bank's business operations, such as natural disasters including earthquakes and typhoons, man-made disasters including terrorist attacks and cyber-attacks, technical disasters including power outages and system failures, as well as infectious diseases.
The Bank has developed business continuity arrangements for various damage scenarios, preparing for situations where important management resources may be impaired. Specifically, the Bank has identified different scenarios where management resources such as the Head Office (Chuo-ku, Tokyo), the Computer Center (Fuchu-shi, Tokyo), or officers and employees cease to function normally. Based on this understanding, the Bank has organized a system which makes use of the computer backup center in Osaka, the alternative site of the Head Office, the Osaka Branch, and business continuity personnel -- employees who engage in operations that must be conducted at times of disasters.
Requirements of the Bank Prescribed by Relevant Laws and Regulations
Under the Basic Act on Disaster Control Measures, the Civil Protection Law, and other relevant laws and regulations, the Bank is positioned as a "designated public corporation," and as having a "crucial economic function." The Bank is required to recover the important functioning of the financial and settlement systems by the end of the day of the disruption or disaster.
Moreover, in accordance with the High-Level Principles for Business Continuity compiled by the Joint Forum (established under the aegis of the Basel Committee on Banking Supervision [BCBS], the International Organization of Securities Commissions [IOSCO], and the International Association of Insurance Supervisors [IAIS]), as well as the Principles for Financial Market Infrastructures (PFMIs)1 by the Committee on Payment and Settlement Systems (CPSS) (now known as the Committee on Payments and Market Infrastructures [CPMI]) and the IOSCO, the Bank is requested to develop appropriate BCPs, both as the central bank and the operator of payment and settlement systems.
Such relevant laws and regulations, both domestic and international, set a wide range of requirements for the Bank, which can be summarized as follows: (1) the Bank must be able to continue its important business operations and complete them in a certain amount of time; (2) in order to do so, the Bank must secure management resources, such as infrastructure and personnel; and (3) the Bank must conduct emergency exercises in order to enhance the effectiveness of business continuity arrangements. As for the Bank's current business continuity arrangements, (1) the Bank has identified important financial and settlement operations and has organized a system in which such operations can be completed by the end of the day of the disruption or disaster; (2) it has prepared an alternative site to the Computer Center and the Head Office, as well as a system in which business continuity personnel reside or stay at accommodation near the Head Office; and (3) it reviews and updates its business continuity arrangements by conducting emergency drills on a regular basis.
- The term financial market infrastructure (FMI) refers to payment systems, securities settlement systems, central securities depositories (CSDs), central counterparties (CCPs), and trade repositories (TRs). With the involvement of large numbers of participants and by centralizing the clearing, settlement, and recording of various financial transactions, FMIs play a critical role in fostering financial stability.