Press Conference by the Minister for Financial Services

(Excerpt)

11 December, 2001

Q.

On yesterday's Tokyo stock market, all of the four major financial group banks were priced at a year-low, and the sector-based Tokyo Stock Exchange Price Index recorded 18-years low for the banking sector. The stock market has been quite sluggish. What do you think are the factors behind the apparent lack of recovery in market's confidence?

A.

I think it's very unfortunate. We have strengthened several initiatives regarding on-site inspections and the criteria for appropriate provisioning to enhance confidence from the market, and each bank announced results of their interim financial results and forecasts for the full term in response to our efforts. I believe the banks are making their utmost efforts.

At the same time, banks are expected to retain their double-digit capital adequacy ratios.

I do want to see investors pay closer attention to the fact that inspection or accounting is being carried out strictly.

Q.

Recently, it is said that one of causes of lower stock prices is anxiety about weaker fundamentals of banks due to disposal of bad loans. There are people who believe that bank stocks will be sold regardless of whether bad debts are disposed or not. What do you think about this view?

A.

Disposal of bad loans is clearly desirable. Some people make a guess that banks are disposing bad loans within the range where their capital adequacy is not exposed to risks, but it is not true.

I would just want to point out that the inspection bureau and the supervisory bureau are strictly separated inside the Financial Services Agency. Both of these two bureaus belong to the same Agency, but they are working based from quite independent mandates.

The inspection bureau is making significant efforts with improvements in various aspects, while leading to bank's stricter recognition of bad loans as well as appropriate countermeasures including sufficient level of provisioning. Together with those, the supervisory bureau clearly declares that no trouble is expected concerning the banks' capital adequacy ratio.

Administration is being carried out by strictly separating inspection and supervision. I do not expect any problems as we proceed in the disposal of bad loans, while monitoring strength of each bank. I would like to ask market participants to appreciate these points more accurately.