Bloomberg Businessweek reported on August 12, 2010 that Japan’s financial regulator picked Goldman Sachs Group, Inc, Morgan Stanley and Nomura Holdings inc. as initial subjects of a new unit to scrutinize risk-taking among investment banks.
Regulators have moved to limit banks’ risk taking to avert a repeat of the financial crisis that sparked a global recession. Japan passed legislation in May aimed at ensuring financial stability and providing greater protection for investors. Under the new law, the regulator was given authority to inspect the holding companies of large brokerages such as Nomura and require them to meet set capital adequacy ratios.
Nomura is Japan’s largest securities firm and New-York based Morgan Stanley runs two local brokerages ventures with Mitsubishi UFJ Financial Group Inc. Goldman Sachs has said it gets about 10% of annual revenue from so-called proprietary trading.
The regulator’s securities division had only three people devoted to making sure overseas brokerages comply with local regulations. The watchdog plans to extent its risk management oversight to include more foreign investment banks. The new created team of regulators will compose of those who have worked for financial companies or have experience in dealing with overseas firms.
