Press Conference by the Commissioner

(Excerpt)

15 July, 2002

Q.

Financial institutions will soon be inspected, now that we are in a new administrative year. We have heard that a new method will be introduced this time, especially for the major banks. Please explain how different the inspections will be from the previous administrative years.

A.

The inspections in this administrative year are called ''resident'' inspections. In short, a chosen, specific team will be in charge of inspecting the same group. Simultaneously, we plan to conduct cross-sectional inspections as well. We hope we will be able to conduct extremely detailed and strict inspections by a dedicated team and a cross-sectional team.

Q.

The report by the Roundtable Committee on the Visions for the Future of Financial System and Administration appears to suggest a system similar to the current market-oriented indirect financing system in the U.S. Do you think the American system is good by nature but is just in a mess at the moment due to dishonest practices and accounting problems by the minority?

A.

The mess in the U.S. system is largely attributable to dishonest accounting, but there are many other factors as well. I will study them in greater depth. However I think the basic idea of having an U.S.-type market is correct, or put differently, a market in which the ratio of direct and indirect financing is well balanced and the market mechanism works. Therefore, I support the basic idea of the Roundtable Committee's report.

Q.

The annual report of the Bank for International Settlements (BIS) released last week is extremely critical of the cross-holding of equity between Japanese banks and major life insurance companies, and states that systemic risks might increase. What is your opinion on this?

A.

The nature of risks is different between insurance companies and banks. It is unclear whether the risks are always regarded the same. As far as the conventional approach is concerned, the nature of the risks is different, and therefore the cross-holding of equity is not a big deal. So-called double-gearing is not excluded at this point, as the nature of the risks is different.