The Japan Financial Services Agency published minutes of the Financial Services Council’s Working Group on Strengthening Regional Financial Power, showing broad support for a draft report that would steer supervisory and policy measures to help regional financial institutions raise local companies’ value and address regional challenges while improving the operating environment and oversight of the sector. Key additions in the draft include early and smoother small and medium-sized enterprise business revitalisation, with consideration of strengthening the effectiveness and dissemination of the Guidelines on Business Revitalization of Small and Medium-sized Enterprises, and a plan to consider more tailored inspection and supervision for loan types including venture debt for start-ups. The report also envisages revising the Supervisory Guidelines to further promote lending that does not rely on management guarantees and to add explanation around the necessity of guarantees in existing individual guarantee contracts. On regional issues, proposals cover sharing impact investment examples and know-how, including for “local zebra companies”, through the Impact Consortium, cooperation with relevant ministries on agriculture, forestry and fisheries, expanding initiatives such as joint branches and joint ATMs to maintain basic services in depopulated areas, and continuing to encourage financial and economic education efforts in the region including use of J-FLEC. For the enabling environment, the draft calls for a drastic strengthening of monitoring, including effective use of on-site inspections and closer verification and follow-up at institutions subject to capital participation, and support for operational improvements through generative AI demonstrations and sharing of risk-mitigation methods, with case studies to be collected and published by the end of fiscal year 2025. The secretariat will refine the draft to reflect member feedback, including clarifying expectations for sector-wide efforts, adding emphasis on digital transformation amid labour shortages, referencing J-FLEC, and considering additions on secondary market development and blended finance. Based on the final working group report, the Financial Services Agency plans to formulate a Regional Financial Capacity Enhancement Plan by year-end and advance related system development, including potential legal revisions.

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