Press Conference by the Commissioner

(Excerpt)

30 July, 2001

Q.

Today, the ''Program Year 2001 Basic Guidelines and Basic Plan for Inspections'' was announced, specifying major banks to undergo once a year. Please elaborate on your position on the policy, and the policy objective.

A.

As the Director-General of the Inspection Bureau may have already explained, inspection should be conducted in principle by giving a priority in terms of its coverage, scope, and depth. Therefore, as to how inspection should be conducted, I think that prioritized inspection is not about, say, inspecting some banks due to the low reliability of their assets assessment, or about unconditionally inspecting all banks of a particular type.

Annual inspection was included in the Inspection Bureau's inspection policy for this program year because many people are having doubts about banks' self-assessment of their assets, namely, the amount of non-performing loans, particularly since the beginning of this year. It is absolutely unbearable for us to be subject to such doubts, as we are already in the stage of conducting inspection for the second or third round since the establishment of Financial Supervisory Agency. Major banks are required to perform self-assessment and undergo external auditing, in addition to inspection by the authority. Banks, or in some cases the Financial Services Agency, announce the amount of non-performing loans that are classified as ''special attention'' or below, in compliance with rules that globally define non-performing loans. It makes us wonder why the figures are so difficult to believe, despite our extensive efforts as such.

However, these doubts are not likely to simply disappear. We therefore decided to conduct follow-up inspections or comprehensive inspections targeting of the 15 major banks this year, as these major banks have the largest impact on Japan's financial system. The annual inspection represents the wish of Minister for Financial Services, Hakuo Yanagisawa and the Financial Services Agency to completely eliminate the general public's doubts. Under normal circumstances, as I have previously stated, inspections should be performed in a more prioritized manner.