FSA to toughen sales disclosures on structured deposits this summer

2026-06-06

The Financial Services Agency will strengthen regulation of special financial products known as structured deposits as early as this summer. While they are popular for their high yields, they also carry the risk of being difficult to withdraw when interest rates rise, prompting the regulator to ask banks for more careful explanations amid a rise in complaints.

Risks to be spelled out in materials

The agency will revise its supervisory guidelines after a public comment period due to begin this month. It will require banks to spell out risks tied to withdrawal restrictions in materials given to customers and will subject any violations to inspections. The Japanese Bankers Association is also set to review its guidelines for banks.

High yields, but heavy restrictions

Structured deposits are similar to time deposits, but their key feature is that banks can extend maturity regardless of the depositor's wishes. If they are redeemed early, fees and other charges can effectively reduce the principal, and in some cases they cannot be cancelled for more than 10 years.

Because they are relatively risky, they offer high yields and spread to major online banks and some regional lenders as products that can earn deposit interest even under negative rates. Balances have topped 400 billion yen, according to the FSA.

Dissatisfaction grows as rates rise

What caught many depositors off guard was the return of a world with interest rates. For banks that have made deposit gathering a top priority, the benefit of extending maturities has become greater, while deposit rates are no longer especially high compared with current market rates. Some online banks make structured deposits a condition for preferential treatment such as fees, and some customers are believed to have signed contracts without fully understanding the terms. According to people familiar with the matter, banks and the FSA have already received several complaints from customers who cannot cancel their contracts.

Possible reversal if rates rise again

The FSA is wary of a widening disruption. The interest rate on structured deposits offered by one online bank in 2022, when rates were negative, was in the 0.5% range, but the rate on one-year time deposits has since risen to 0.4%. If the policy rate is raised further, a reversal with structured deposits is likely and the number of customers seeking cancellations is expected to increase.

Response also on structured notes

The FSA has also been stepping up measures against the sale of financial products that use derivatives. In the case of structured notes as well, it has previously called for clearer explanations in response to a rise in complaints.

Enjoyed this article? Share it with your network!