QuestionWhat are on-site examinations?

The Bank conducts on-site examinations and off-site monitoring to grasp the business activities and financial conditions of financial institutions that conduct transactions with the Bank through the current accounts they hold at the Bank. In its conduct of on-site examinations, the Bank thoroughly assesses the financial institutions' business operations and risk management frameworks¹ by visiting their premises.

Based on the results of its on-site examinations, the Bank, as necessary, advises the financial institutions to improve their business operations and risk management frameworks.

Article 44 of the Bank of Japan Act stipulates that the Bank may, for the purpose of appropriately conducting business to ensure financial system stability, conclude a contract with the financial institutions concerning on-site examinations. In accordance with this Article, the Bank concludes contracts with the relevant financial institutions and carries out on-site examinations.

The Bank formulates and releases an on-site examination policy every fiscal year based on the decision of the Policy Board. The document outlines the situation of financial institutions' business and risk management as assessed in the previous fiscal year's on-site examinations and off-site monitoring, and also provides key issues in the conduct of on-site examinations, while taking into account recent changes in the environment surrounding the financial system. The Bank does not publish the results of its examinations on individual financial institutions, as it is bound by confidentiality obligations under the examination contract and Article 29 of the Bank of Japan Act.

1. 1Through its on-site examinations, the Bank captures and assesses various risks that the financial institutions face, accompanied by the conduct of their business, including lending and securities investment. Such risks include credit risk, market risk, liquidity risk, and operational risk.