Press Conference by Kaoru Yosano, Minister of State for Economic and Fiscal Policy and Financial Services

(Excerpt)

September 1, 2006

1.  Minister's Statement

Let me explain the position of the Financial Services Agency (FSA) with respect to Ashikaga Bank.

I will first provide a brief explanation, and then the administration staff will give you a detailed explanation. I will read it out slowly so that you can take notes.

The title is "Looking for an Acquirer of Ashikaga Bank".

Since the temporary nationalization measure was taken under Article 102 of the Deposit Insurance Law in November 2003, various efforts have been made at Ashikaga Bank including management reform. Considering that such efforts are steadily yielding results now, we decided to start looking for an acquirer of Ashikaga Bank in concrete terms.

Upon selecting an acquirer, we will conduct an examination from three basic viewpoints: firstly, sustainability as a financial institution; secondly, demonstration of financial intermediation functions in the region; and thirdly, minimization of the public burden. In doing so, we will attentively listen to the opinions of locals, as I have always stated.

Now, let me explain the selection procedures.

In phase 1, we will present the basic requirements to be fulfilled by the acquirer in about two months time, invite candidates and then screen them.

In phase 2, we will ask the candidates who have passed the screening process to submit a business plan, and then narrow down the candidates.

In phase 3, we will ask the remaining candidates to submit the terms and conditions of takeover and other matters, and then determine the ultimate acquirer.

Procedures consisting of these three phases are being considered.

In the selection process, we plan to launch a working group on selecting an acquirer of Ashikaga Bank and convene the group as necessary as a place to seek advice from neutral outside experts from a technical standpoint and seek the opinions of locals. We will make efforts to select a proper acquirer so that Ashikaga Bank will be able to establish trust among customers in the region centering on Tochigi Prefecture and demonstrate its financial intermediation functions in a sustainable manner even after being transferred to an acquirer.

Further information will be reported later by the administration staff as stated earlier.

The first meeting is scheduled to be held on Tuesday September 5. I cannot provide a complete timetable, nor can I make concrete projections in regards to how long it will take to make the final decision. But based on our experience in dealing with such problems in the past, we can estimate that it would probably take about a year.

This concludes my explanation. The administration staff will talk about the members of the working group and other matters later, providing you with a list of members. Four individuals will participate in the group, in addition to the Chairman. The working group will consist of five individuals, including a scholar, a member of Nippon Keidanren (Japan Business Federation), a Certified Public Accountant (CPA), a legal specialist and an attorney.

2.  Q&A

Q.

What kind of management principles and objectives are deemed appropriate for the acquirer of Ashikaga Bank?

A.

Firstly, what matters the most is to make it function as a bank and as a financial institution, so it is important that the acquirer has a management team with appropriate management principles, in addition to capital enhancement.

Furthermore, as Ashikaga Bank is a regional bank in charge of Tochigi Prefecture's economy, the acquirer should truly care about the regional economy and be willing to share its fate with the regional economy, rather than just pursuing the logic of capitalism.

In addition, from the government's standpoint, it goes without saying that we want Ashikaga Bank to be purchased at the highest price possible. This translates into minimizing the public burden.

Q.

Having listened to your explanation on various matters regarding Ashikaga Bank, could you please summarize the current positioning of Ashikaga Bank and the efforts made over the past three years?

A.

Specific figures were released in the fiscal year ended this March, and were somewhat better than our expectations. It was helped by the progress made in the disposal of non-performing loans (NPLs) and some changes in the classification of loans in line with improvements in the state of the economy on the whole.

Ashikaga Bank is currently managed by an expert on regional financial services from the Bank of Yokohama, who is engaging in the job with a genuine sense of mission. At the same time, employees of Ashikaga Bank are very strongly committed to rebuilding their own bank, and there is an extremely strong atmosphere in the local community led by the prefectural governor to invigorate Ashikaga Bank, which is their regional bank. In that sense, the pace of rebuilding Ashikaga Bank is half a step or a step faster than we had presumed.

Q.

Are there plans to provide an explanation on this matter to local residents of Tochigi Prefecture or create an opportunity to listen to their opinions in the near future?

A.

While it has not been finalized yet, the governor and other concerned parties of Tochigi Prefecture are scheduled to visit Tokyo in the middle of this month. During their visit, senior officers of the FSA including myself and FSA Commissioner Hirofumi Gomi intend to properly provide a detailed explanation of the situation. Of course, we will respect Tochigi Prefecture's opinions.

Q.

While acknowledging that you cannot provide a concrete schedule for determining the ultimate acquirer of Ashikaga Bank, the so-called "program year" changes when personnel shuffling takes place in summer based on the cycle in government offices, so it should be about this time of next year if we straightforwardly assume that it would take about one year. Do you intend to accomplish the task slightly earlier than that, before early summer?

A.

Thank you for your concern.

This kind of matter is discussed regardless of the person in office: administration is executed matter-of-factly in accordance with the prescribed rules. Once started, the task will be carried out matter-of-factly following the set course, whoever is the senior officer of the FSA.

Q.

This question relates to the specifics of Ashikaga Bank, so please express your thoughts if possible. Firstly, the working group is deemed to play a central role in taking up the requests of the locals in the future, but how exactly is it going to be done? Secondly, there are some concerns among locals about members of the working group not necessarily being knowledgeable of Tochigi Prefecture's economy. What are your thoughts on this?

Thirdly, some locals are suggesting that local residents should be allowed to participate as observers in the working group. Does this issue deserve to be considered in the future? Your views on these three matters will be appreciated.

A.

The working group will, as a matter of course, look into specific information, including the selection process. As this includes proposals made by private businesses, the deliberation and screening processes should be limited to members of the working group as a general rule.

However, we will of course conduct interviews as well, so we intend to carefully listen to the opinions of the governor of Tochigi Prefecture, the local business community, the council and other interested parties.

Q.

In relation to the revision of the system of moneylending businesses, what is your understanding of the need to take preferential measures for short-term loans in small amounts? Also, there are concerns that under the draft plan currently being examined by the FSA, the preferential measures might not be abolished and might survive even after the expiry of the preferential period. What are your views on this?

A.

In regards to the second question, my understanding is different.

As for the first question, we will ultimately create an environment in which the interest rate cap under the Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits matches 20% set forth by the Interest Payment Restriction Law. As the need for short-term loans in small amounts was also suggested by the Liberal Democratic Party (LDP), it is politically possible to accept it under various strict conditions for a short period of time, partly as a way of alleviating radical change.

Q.

In regards to the preferential measures just mentioned, the time given to reduce interest rates is three years and the subsequent preferential period is five years according to the draft plan reported at present. Some people are saying this is not slightly short but long. What is your opinion on this?

A.

I believe the LDP will address this matter.

I personally think nine years is long and wonder whether such a long period of time is needed. I expect the LDP to make a political decision on this matter.

Q.

In relation to Ashikaga Bank, the administration and business groups in the region are already voicing their opinions at press conferences and in writing about the selection of the acquiring financial institution based on the elimination method, including expressing their dislike of foreign-affiliated institutions and mega-banks and naming undesirable financial institutions in the region and in neighboring prefectures. Will all such opinions be considered, or will the decision be made in the context of the three conditions mentioned earlier by comparing them to and weighing them against other conditions?

A.

While the locals have absolute freedom of thought, the FSA will deal with the matter without prejudice from its own standpoint strictly without discriminating between domestic and foreign institutions.

(End)