Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

May 8, 2007

Q.

American debt rating agency Moody's Investors Services has upgraded ratings on Japanese megabanks. Would you give your impression on this action?

A.

I welcome the upgrade of ratings on Japanese banks as indicating the overseas recognition of these institutions to be shifting away from systemic risks to a development stage. Generally speaking, we hope that major banks that have overcome the nonperforming loan problem will conduct their business management to increase their presence in international financial markets and meet customers' diversified needs. I hope that banks will take this opportunity to fulfill further banking functions.

Q.

As Kirayaka Bank was established in Yamagata Prefecture, moves have emerged for integration of regional banks in the financial world. Will you give your views about realignment of regional banks anew?

A.

Management integration should be left to financial institutions' independent business decisions. Generally, management integration can be expected to improve business efficiency through the economies of scale or scope, efficient distribution of business resources like branches, increased system investment efficiency and diversification of personnel and know-how, and to improve corporate governance through management reforms and stakeholders' mutual checks. It may be difficult to generally discuss specific effects of management integration deals that may differ depending on specific entities and their surroundings. I hope that the latest management integration deal will lead to positive results as noted earlier. While there may be negative management integration deals between regional banks in regions where the nonperforming loan problem still lingers, there may be positive deals to enhance profitability or make preparations for a mega-competition age. In this sense, the Financial Services Agency would like to pay attention to how management integration will contribute to enhancing the soundness of banks and economic growth, while watching future developments.

(End)

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