The Bank of Japan adopted new rules Friday banning its executives from engaging in most types of investment, including stocks and private equity funds, in response to the public furor over personal investments BOJ Gov. Toshihiko Fukui made before he became chief of the central bank.
The central bank aims to release and enforce the new internal rules by the end of this month, based on recommendations compiled Thursday by a BOJ advisory panel.
The decision was unanimously endorsed at a BOJ Policy Board meeting Friday morning.
The new in-house regulations target the governor, two deputy governors, and the six other members of the Policy Board, as well as six executive directors.
They will be banned from investing in most financial products, ranging from foreign currency deposits exceeding $100,000, stocks, trust funds and bonds, except government bonds for individuals, during their terms and for a year after leaving their posts.
But the other six Policy Board members, who are brought in from banking, academia and other sectors, will be allowed to hold onto their stocks and bonds. However, they will also be required to disclose their stockholdings and financial products to ensure transparency.
The nine Policy Board members will also be banned from investing in private funds and private equities expected to go public on grounds that information on such entities is not available to ordinary investors.
The BOJ executives will have to promptly sell their financial products when they assume their posts.
To ensure the executives abide by the new rules, the BOJ is likely to set up a third-party panel of lawyers and public accountants to check their financial deals and holdings.
To make regulations on BOJ executives more effective, the Policy Board members also will be required to publish their financial assets.
The nine members will have to reveal their financial assets within three months of taking office and after leaving their posts, the panel said.
The governor and two deputies, however, will come under closer scrutiny. According to the new regulations, the top three executives will be obliged to reveal savings-oriented financial products, given the significance of their positions in monetary policy.
The current nine Policy Board members will have to unveil their financial assets by the end of September, the new rules said.
Hideaki Kubori, a lawyer and one of eight members of the panel, said Thursday that the regulations proposed by the panel are the toughest of their kind among central banks in developed nations.
“Compared with central banks in the United States and European nations, they are at the cutting edge,” Kubori said.
“Now that we received the recommendations for executives, we have to also deal with regulations on nonexecutive (BOJ) officials on financial trading,” Deputy BOJ Gov. Toshiro Muto told a news conference Thursday. Muto heads a study panel on the matter.
Fukui has been under fire for retaining an investment in a fund founded by Yoshiaki Murakami, who was charged with insider trading last month, even though the investment did not violate current in-house regulations.
Fukui invested 10 million yen in the Murakami fund in 1999 when he was chairman of a private think tank. He kept the money in the fund after becoming BOJ chief in 2003.
According to documents he presented to the Diet last month, the investment had risen to 22.31 million yen as of the end of last December.
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