Press Conference by the Commissioner

(Excerpt)

5 August, 2002

Q.

What are your views on the full-scale restart of the ''pay-off'' system, which caps the government's guarantee on individuals' bank deposits? Also, we have heard that the financial payment and settlement system and the protection of settlement deposits will be subject to review. What are your views on the protection of the settlement system?

A.

On July 30, the Prime Minister gave instructions to Financial Services Minister Hakuo Yanagisawa on ensuring the stability of the financial payment and settlement system. In response, the decision was made to restart the ''pay-off'' system as scheduled. On the other hand, we intend to swiftly review the measures to assure the stability of settlement functions and develop the necessary revision plan.

Specifically, we will promptly make the Financial System Council form a project team and develop the necessary revision plan expeditiously. Please understand that we are not in the position to comment on the future directions at this stage.

Q.

What about the announcement last week, regarding the progress of plans to rehabilitate the management of banks that received public funding? Lending to small- and medium-sized enterprises (SMEs) have not been fulfilled especially by major banks --some fall short by trillions of yen. What is your opinion on this?

A.

Truly, there are banks that are providing loans insufficiently to SMEs to a considerable degree, as you pointed out. We have been given the explanation that it is attributable to the poor demand for equipment and operating funds associated with the deteriorating business environment, or due to so-called financial restructuring (larger companies in the business group procure funds while smaller companies do not). In any case, we intend to require banks to provide us with a thorough report on the reasons for the curtailment of loans to SMEs, based on Article 24 of the Banking Law.

Q.

Last Friday, there was an announcement on the status of non-performing loans (NPLs). NPLs at banks nationwide totaled 43 trillion yen or so, and accounted for more than 8% at the 13 major banks. This is quite different from the projections for normalization made a year ago. What is your view on this?

A.

Indeed, the actual figures in FY2001 are different from the projections previously reported to the Council on Fiscal and Economic Policy. Basically, however, the increase is believed to be one-off in nature, as it is caused by the deteriorating economic environment, the stricter classification criteria for restructured loans, the execution of special inspections, and so on. We are actively making efforts to make the banks dispose of NPLs: for example, the extra amount caused by special inspections will be disposed of by the end of this fiscal year at the latest. Assuming ''the Mid-term Perspectives'' presented by the Council on Fiscal and Economic Policy (that the nominal growth rate will be 0.6% in FY2003, or exceed 2.5% in FY2004), we will continue making efforts to solve the NPL problem in FY2004, and we believe that it is possible.