Press Conference by the Commissioner

(Excerpt)

13 May, 2002

Q.

There have been reports that the government will request the Resolution and Collection Corporation (RCC) to purchase non-performing loans (NPLs) at roughly double the existing price for the purpose of promoting the disposal of NPLs. Are any new measures being considered with respect to the purchasing of NPLs by RCC?

A.

The decisions claimed to have been made and the matters allegedly being considered according to the reports are not by any measure based on the facts.

As you may be aware of, the revised Financial Revitalization Law came into effect on January 11, 2002, which made the point that the NPLs must be purchased at the ''fair value.'' The amount of NPLs purchased from January 11 up until the end of March totaled 230 billion yen on a book-value basis, that is, on a principal basis. In biddings, RCC has won 5 and lost 19: it has won at least 5 times, which shows that RCC is actively purchasing NPLs within the ''fair value'' framework.

Also, compared to the situation prior to January 11, the so-called purchase price on a principal basis increased by 1.9 times, from 3.7% to approximately 6.9%. This shows that fair-value purchases are increasingly gaining ground in RCC's active purchasing approach.

It is necessary to avert the implications of moral hazards among banks, and also avoid the issue of increasing the taxpayers' burden due to secondary losses. In many aspects, we believe that there is no alternative but to settle the purchase price at the ''fair value'' as stipulated by law. With respect to fair value, compared to 6.9% , 15% -- which is twice of that percentage --, cannot be automatically said as the fair value. Fair value is determined according to the demand and supply in the NPL market at that particular point of time, and the fluctuations are believed not to be so lug.

In addition to this, we are requesting RCC to take an active approach for purchasing NPLs. However, the purchasing body does not have to be limited to RCC: various funds, etc. including foreign institutions are welcome to take over the purchasing of healthy banks' NPLs.