haruhiko kuroda : international financial regulation and supervision - past achievements, current issues, and future agendas remarks by mr haruhiko kuroda, governor of the bank of japan, at the 2019 paris europlace international financial forum, tokyo, 28 november 2019. * * * introduction i am very honored to have the opportunity to speak at the paris europlace financial forum again this year. this is a valuable forum for exchanging ideas on interesting topics such as global financial regulation, financial innovation, and esg, which are featured today. the forum also plays an important role in promoting paris as a financial center. turning to tokyo, there is an ongoing effort to realize “ tokyo ’ s vision for a global financial city ” and mr. nakaso, who appeared as a speaker earlier today, is leading this effort as chairman of the organization of global financial city tokyo. i think this is a valuable opportunity for interaction between the global financial centers of tokyo and paris. over the past three years, i have talked about future challenges, such as financial innovation and demographic changes. this year, i will change focus slightly and look back on the discussions on regulation and supervision in the wake of the global financial crisis, and then discuss issues that are currently of particular importance. i would also like to touch on issues that are likely to increase in importance in the future. i. past, present, and future of international financial regulation and supervision since the global financial crisis, financial institutions around the world have increased their capital adequacy ratios under new international financial regulations, such as basel iii. these regulations have been discussed and formulated by authorities worldwide and have helped increase the robustness of the global financial system. however, looking back on history, financial crises have repeatedly occurred in different forms, often with the advent of new financial technologies. as we are not crystal gazers and cannot foresee the future completely, we need to identify risks to the financial system in as forwardlooking a manner as possible. based on a deep understanding of our past experience, we must monitor the progress of new financial innovation and changes in the environment surrounding financial institutions. we then need to design international financial regulations so that any risks identified do not lead to the next financial crisis. even after global financial regulations have been carefully formulated and implemented, their effectiveness may be impaired by progress in financial technology and changes in the business environment. there is also the risk of unintended negative side effects that may demand further intervention

at the monetary policy meeting on february 28. yields on long - term government bonds are mainly moving in the range of 1. 4 - 1. 5 percent recently. yield spreads between private bonds ( bank bonds and corporate bonds ) and government bonds are expanding slightly. stock prices started to turn up due to tighter regulations on short - selling of stocks and the rise in u. s. stocks, and are subsequently increasing as domestic and foreign institutional investors bought back. in the foreign exchange market, the yen surged temporarily in reaction to the rise in japanese stock prices but is weakening once again thereafter. with regard to corporate finance, private banks are becoming more cautious in extending loans to firms with high credit risks while they continue to be more active in extending loans to blue - chip companies. the lending attitudes of financial institutions as perceived by firms are becoming more severe. in corporate bonds and cp markets, the fund - raising conditions are generally favorable particularly for firms with high credit ratings, but the issuing environment for those with low credit ratings continues to be severe on the whole. credit demand in the private sector continues to follow a downtrend mainly because firms are decreasing their business fixed investment while continuously reducing their debts. amid these developments, private banks ’ lending continues to decline at about 2 percent on a yearon - year basis. meanwhile, the amount outstanding of corporate bonds issued is growing at around 2 - 3 percent on a year - on - year basis. the year - on - year growth rate of the amount outstanding of cp issued continues to decline, although the amount is still well above the previous year ’ s level. the year - on - year growth rate of the monetary base has increased further and is recording a substantial increase of somewhat less than 30 percent. the year - on - year growth rate of the money stock ( m2 + cds ) has increased slightly. funding costs for firms continue to be at extremely low levels on the whole, although market funding costs for some firms and the long - term prime lending rate are rising somewhat. overall, the recent financial environment remains extremely easy on the whole in terms of money market conditions. however, the fund - raising conditions of firms with high credit risks, especially of small firms, are gradually becoming more severe as private banks and investors continue to be more cautious in taking credit risks. hence, the developments in the behavior of financial institutions and corporate financing continue to require closer monitoring.