April 1, 2002

Statement of the Minister for Financial Services

- Regarding the Removal of Blanket Deposit Insurance -

1. Today, the beginning of the new fiscal year, is a starting point into a new era for depositors, financial institutions and financial services administration. The application of deposit insurance has become based upon the fundamental rule ; i.e. protection up to 10 million yen of principal and its interest, except liquid deposits (so-called resumption of ''pay-off'' scheme). This partial deposit insurance scheme has been resumed as an important part of the policy for structural reform.

2. For five years (from FY 1996 to FY 2000 ), an exceptional measure of blanket deposit insurance was introduced as a temporary and extraordinary means to cope with financial turbulence. This measure was continued in FY 2001, in light of the transfer of the supervision and inspection responsibilities of credit cooperatives from prefectural governments to the national government in April 2000.

   During this period, in the context of the financial sector regulation, the initiatives taken to prepare for the removal of blanket deposit insurance include the following.

   • Enhancing disclosure regarding management and financial state of financial institutions
   • Providing a permanent safety net to respond to situations in case of a financial crisis
     (including up to 15 trillion yen of government guarantee available in FY2002)
   • Vigorous activities to promote understanding by depositors

3. The Financial Services Agency (FSA) has made efforts to ensure the soundness of financial institutions through appropriate supervision and inspections so that the stability of the financial system may not be undermined. Also, each financial institution has made efforts to improve its business management.

   As a result of these efforts, today we can see such a situation where the financial conditions of each financial institution satisfy the standard of soundness.

4. With the removal of blanket deposit insurance, while depositors come to select financial institutions based on their own judgment and responsibility, financial institutions are urged to devote themselves vigorously to their business management with a heightened sense of alert in order to win depositors' confidence. In this regard, responsibilities of top executive officers of financial institutions are even more important, and therefore, they are urged to make further efforts to meet their responsibilities.

   The FSA intends to continue to fully ensure the stability of the financial system, cooperating closely with the Bank of Japan, through appropriate inspections of financial institutions and supervision including implementation of prompt corrective actions in a timely manner when necessary.

5. Should there be any threat of a financial crisis in future, the FSA is ready to take every necessary measure including capital injection according to the relevant laws.