Press Conference by the Minister for Financial Services

(Excerpt)

June 10 , 2003

I would like to report on the Financial Services Agency's determination to recapitalize the Resona Bank.

On May 30, 2003, the Resona Bank, Ltd. made an application stipulated in the Article 105.1 of the Deposit Insurance Law for the measure, that is, recapitalization, under the Article 102.1. (1) of this Law and submitted a plan for restoring soundness of management, that is, a business revitalization plan, based upon the Article 105.2 of the Law.

Since the contents of this application and the business revitalization plan were judged to fulfill the requirements mentioned in the Article 105.3 of the Deposit Insurance Law as a result of an assessment of them, we determined to recapitalize the Resona Bank today.

With regard to the amount of recapitalization, a view was expressed that '' it is necessary to ensure its capital adequacy ratio well in excess of 10% in order not to raise concerns of depositors, customers and markets'' in the report of the Financial System Management Council on May 17. Based on this report, the amount of recapitalization is to be 1,960 billion yen in accordance with the application from the Resona Bank. It is estimated that the consolidated capital adequacy ratio of the Resona Bank will rise to approximately 12.2 percent.

The stocks of the Resona Bank to be acquired by the Deposit Insurance Corporation will be converted to those of the Resona Holdings, Inc. by stock exchanges, and the content is a combination of common stocks and voting preferred stocks. It is estimated that the ratio of voting rights held by the Government will exceed 70 percent by this action.

For details of the bank's business revitalization plan, please refer to its announcement. The FSA will require the bank to report the progress of the plan and will publish it, based on the Article 108.2 of the Deposit Insurance Law.

As the Resona Bank held a large amount of losses carried forward at the account settlement of March 2003, the bank is required to reduce its capital as a condition for the recapitalization, based upon the Article 106.1 of the Deposit Insurance Law.

Q.

We would like to hear your view on the repayment of public funds at this stage.

A.

Both a basic repayment principle and an refundment plan are described in the business revitalization plan. It describes how long it will take for the bank to refund the public funds injected this time and the previous one, by appropriating the profit that is gained by subtracting an estimated outflow from the bank from the net profit for each financial term, for successive years. The period of 15 years is presented, which is a figure calculated based on certain expected profitability of the bank. We look forward to a stage ahead where Resona's operations will be back on the right track and back in esteem of markets and the stocks representing the injected public funds will be gainfully salable on markets. Anyway, we earnestly hope that the bank will reestablish its managerial soundness which receive high commendation from markets.

Q.

Will you elaborate a little more on grounds for the modalities of the recapitalization?

A.

Our basic idea was that common stocks should be the core to ensure rigorous corporate governance. In some instances in the past, public funds were injected by acquiring preferred stocks. However ,the market stock price, we think, will be a clear message about the current value of the injected public funds. It will be a simple and clear index helpful to us in keeping watch over changes of the value of the funds. This was also at the base of our decision that common stocks be the major part of the acquisition. On the other hand, if a very large sum of common stocks is to be acquired, we must be cautious to a certain extent about the impact of dilution on the market trend in terms of the asset per share, net asset per share or profit per share. Accordingly, it was decided that the number of common stocks to be acquired be equal to that of the issued stocks at present and that the remainder be represented by voting preferred stocks to be issued. In that sense, we intended to make the modalities as clear and simple as possible.

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