The Financial Services Agency’s questions are orders

August 10, 2021
by Noriyuki Morimoto

While the Financial Services Agency (FSA) states the importance of dialogue with financial institutions, given its position as supervisory authority with various powers, there is no way for the Agency to engage with financial institutions as equal counterparts. When asked a question by the FSA which is the regulator, as an inevitable reaction of the regulated party, financial institutions have to make assumptions on the regulator’s intentions.

It is interesting to note that an affirmative question ( i.e., why do something) is interpreted as having a negative connotation, while a negative question (i.e., why not do something) is interpreted as having a positive connotation. For example, if asked why there has been a sharp increase in credit card loans, financial institutions understand it as being instructed to curb credit card loans.

In any case, as long as the FSA, as the supervisory authority, asks a question, it can never be a question, but instead becomes some instruction, suggestion, or a weak form of order. This kind of analysis related to the functional aspect of language is an important and profound research topic in contemporary philosophy, taken up by the school of ordinary language philosophy.

Hence, the FSA has recently stated that it will ensure psychological safety in its dialogue with financial institutions, but it is unclear what exactly this means. In the first place, psychological safety is something that is felt by financial institutions, and therefore impossible to ensure from the FSA’s side.

If the FSA desperately wants to ensure psychological safety to learn the hidden truth about financial institutions, it has no choice but to promise that it will never take administrative action or otherwise exercise its executive power, and that it will not make things public, no matter what is revealed. But the FSA should not be prepared to go that far, and moreover, what is the point of knowing anything if it cannot take any measures or actions in response?


[Category /Deconstruction of Finance]

Noriyuki Morimoto
Noriyuki Morimoto

Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.