Press Conference by the Commissioner

(Excerpt)

19 November, 2001

Q.

I would like to ask you some questions about the lifting of the freeze on the limited deposit insurance system, so-called pay-off system. You said the bad loan problems would be normalized in three years. What does the Financial Services Agency think about lifting the freeze on the limited deposit guarantee system before the bad loan problems are solved?

A.

The pay-off had been frozen as a temporary, exceptional arrangement in 1996, and the period of the freeze was extended to April 2002 because the inspections by the central government on some part of financial institutions was expected not to be finished during FY2000. We finished our inspections within one year since April last year, or more accurately, during the business year that commenced in last July. We believe financial institutions that should exit from the market have already taken step out. Therefore, the Financial Services Agency considers there is no reason left for further postponing the lifting of this temporary, exceptional arrangement for additional one or two years.

To put it differently, if the lifting is further postponed next year, I am afraid that this temporary, exceptional arrangement may be sustained forever. There are always various anxieties in our world, and we are able to take any steps to protect the full amount of deposits through a decision by the Committee against Financial Crises if an event related to the financial systemic risks occurs even after the freeze on pay-off is lifted. In addition, a variety of safety net systems are established, and so the Financial Services Agency does not have any intention at present to further postpone the lifting.

Furthermore, depositors have increasingly reduced time deposits exceeding ten million yen, and the statistics announced by the Bank of Japan show tendencies toward an increase in small-amount, diversified deposits. Also, almost all of the financial institutions are going to put the supplementary offset clause into the deposit taking contracts within this fiscal year, and we recognize that depositors are also preparing against various possible situations.