Press Conference by the Commissioner

(Excerpt)

5 November, 2001

Q.

Last week, some officials in political parties and members of the business community reacted to the controversy over the restart of the pay-off system. While the stance of the Financial Services Agency and the Japanese government has been clarified by Mr. Hakuo Yanagisawa, Minister for Financial Services, many people who are cautious of the restart claim that small and medium financial institutions and small and medium-sized enterprises (SMEs) might face a tougher situation amid the recession. What is your opinion on such claims?

A.

It boils down to what Mr. Yanagisawa has already said: basically, Japan is the only developed country that has suspended the pay-off system of deposit insurance, as a temporary, exceptional measure. We presume that it is the FSA's duty to bring this to an end by March 2002, restart the pay-off system, eliminating any depositors' anxiety by then. As you already know, we conduct very strict inspections, and viable financial institutions continue to operate in the market, whereas unviable financial institutions have been forced to leave the market. Based on such practices, I believe it is important to create an environment in which the pay-off system could be restarted by March 2002.

With this in mind, in regard to the claim that SMEs might be severely affected, we closely monitor the movement of deposit funds and the of liquidity position. Financial institutions obviously claim that they are financially sound, but I suppose that there may be some depositors who would still be unconvinced. To deal with such a situation, they are revising special offsetting arrangements and making other efforts. There is, for example, a development of a scheme to systematically diversify deposits, including the transfer of funds from a particular financial institution to another when they exceed 10 million yen within a fixed period under a business alliance arrangement. I believe there has already been a shift in deposits on the part of depositors as well, aimed at diversifying some of the deposits in recognition of the restart of the pay-off system. The monitoring results suggest that these trends had already been under way and that there is no rapid withdrawal of deposits at present. In short, the situation is calm. Under these circumstances, I believe there is no need to worry about the financing of financial resources by small and medium financial institutions. The loan-to-deposit ratio of small and medium financial institutions indicates that there is a substantial deviation down from 100%, and at this stage, loans to SMEs should not be adversely affected by the withdrawal of deposits from small and medium financial institutions. That is my understanding, including with reference to the deposit-loan ratio.

Q.

When the case of Shinsei Bank was taken up at the Diet last week, Mr. Yanagisawa denied any validity to the report. Namely, The Asian Wall Street Journal reported that two months ago you put pressure on the 4 banks -- is this report erroneous?

A.

The report is not true at all. I should be careful considering that the issue is being taken up at the Diet. Basically, there is an agreement between the banks receiving capital injection and the government, which is concerned with the smooth provision of financing. Just in very general terms, we do discuss with the banks on various occasions the management stance and other issues, including those related to the general public's concerns.

However, it is out of question to issue administrative orders to make them continue or terminate loans to specific companies. I have never done anything as such.