The Finance Ministry has decided to require all securities houses to maintain capital adequacy ratios above an appropriate level and to disclose the ratios once every three months, sources in the ministry said Monday.
If a brokerage's ratio drops under 100 percent for a span of three consecutive months, the ministry can ban officially ban it from operating as a registered entity, the sources said. The ministry usually uses capital ratios only for reference, but their use as criteria for suspension may change, the sources said.
These changes will be written into a bill for revising the Securities and Exchange Law that will be submitted to the ongoing Diet session, and the changes will be implemented as rules for fiscal 1998 starting in April, according to the sources.
A capital ratio of 200 percent or higher is a "healthy" ratio, and an order to suspend operations is mandated if the ratio drops to 120 percent or lower. Failure to improve results in revocation of the firm's license.