Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, January 7, 2011, from 10:50 a.m. to 11:02 a.m.)

[Opening Remarks by Minister Jimi]

At today's cabinet meeting, I obtained approval for my trip to Europe scheduled for January 9 to 16. During this trip, I will visit France, Belgium and the United Kingdom and exchange opinions with officials of European governments and the European Commission.

As you know well, since the Lehman shock, which occurred three years ago, there have been the so-called Greek shock and various problems related to Ireland. Particularly, I am going to visit the City of London, and Brussels, which is the base of the EU (European Union) and the European Commission, and France is also a major EU country. Therefore, I am planning to meet with the governor of the Bank of England and various other officials.

While a consensus was reached on some issues at the Seoul summit, the financial system is integrated. As a broad framework of the global economy is important in that sense, I, as the head of an administrative agency, would like to listen to various opinions from the officials involved in policy-making decisions. I will listen to them about what they are going to do while looking them in the eye and watching how they look. For Japan, the financial sector has been a very significant destabilizing factor for the past few years in particular. In this sense, I will go to Europe with a resolve to perform my duties as the head of an administrative agency-although I hear that it is very cold in Europe.

This is all I have to say.

[Questions & Answers]

Q.

My name is Sonoda, and I am from Hokenmainichi Newspaper.

Could you comment on the inclusion of the perspective of integrated risk management in the Inspection Manual for Insurance Companies?

A.

We drew up a draft proposal for the revision of the Inspection Manuals for Insurance Companies, including the revision of the overall structure intended to change the previous method of enumerating individual inspection items, so as to make it easy to examine which functions at which sections of an insurance company are problematic. This proposal is now being subjected to the public comment procedure.

Because it is becoming increasingly important for insurance companies that face large-scale and complex risks not to manage various risks individually, such as asset management risk and insurance underwriting risk, but to manage them in an integrated manner, we reviewed inspection items related to integrated risk management and included additional items in the revised manuals. We are not suddenly adopting the perspective of integrated risk management. The revision of the guidelines for supervision of insurance companies in June 2009 included the adoption of this perspective and we have examined the integrated risk management systems of insurance companies in our inspections.

A major turning point was the governmental intervention that was eventually required at the time of the Lehman shock because AIG, the largest private insurance company in the United States, was selling CDS (credit default swap). That was one of the reasons for the introduction of the examination of the integrated risk management system. We considered how to improve the manuals while keeping in mind that the manuals are useful not only when examiners conduct inspection but also when insurance companies make voluntary efforts to improve their systems. We hope that insurance companies will make voluntary efforts to advance risk management, namely, conduct integrated risk management, rather than manage individual risks separately, in reference to the revised inspections manuals for insurance companies.

Q.

Resona Bank has indicated it will increase capital through the public offering of shares and repay public funds. How does the FSA, as a shareholder in this bank, view that move?

A.

I am aware of such media reports about Resona, which I read in newspapers today. However, I would like to refrain from making any comment, since a capital increase is a matter that concerns the capital policy of an individual financial institution.

I understand that Resona Holdings released a statement saying that it has not made a decision on this matter.

Q.

The Compulsory Automobile Liability Insurance Council will hold a meeting in mid-January at the earliest. In relation to this, the Ministry of Land, Infrastructure, Transport and Tourism and the Ministry of Finance have exchanged a memorandum of understanding on the postponement of the return of about 600 billion yen that was transferred from the former account for compulsory automobile liability insurance to the general account. The 600 billion yen, which consists of investment profits and interest related to compulsory automobile liability insurance, has remained unreturned for 20 years and the return will be delayed again, by seven years. Isn't it necessary to review the compulsory automobile liability insurance system?

A.

As you pointed out now, the government's fiscal condition is difficult. I understand that the Compulsory Automobile Liability Insurance Council will deliberate the level of the compulsory automobile liability insurance premium rate on Friday, January 14, based on the results of examination by the Non-Life Insurance Rating Organization of Japan. Therefore, although I am aware of media reports about compulsory automobile liability insurance, nothing has so far been determined with regard to the compulsory automobile liability insurance premium rate for the next fiscal year. As for the ratio of insurance payments to compulsory automobile liability insurance premium revenue, 139 yen is paid for each 100 yen in revenue. If I remember correctly, the amount of the transferred funds was 2 trillion yen, of which 600 billion yen still remains unreturned. As the government's fiscal condition is generally difficult, I would like to deal with this matter while taking into consideration the need to ensure safety for the people as much as possible and the compulsory nature of the automobile liability insurance. However, I am not thinking of resolving this matter immediately.

Q.

The business environment for consumer loan companies has been slow to improve. What is your view on the response and responsibility of megabanks that have consumer loan companies within their groups?

A.

After I took office, the amended Money Lending Act was fully put into force and the Follow-Up Team was established. While consumer loan companies have faced very difficult business conditions since the Supreme Court issued the ruling, the people have needs for consumer loans. For example, some shinkin banks are actively providing consulting concerning the protection of depositors and the issue of multiple debts, and I greatly appreciate such activity.

We established the Follow-Up Team because this is a very long-term issue, so we must find a solution with that in mind.

According to statistics compiled at that time, there were around 15 million people who borrowed consumer loans. On the other hand, multiple debts are a very serious problem. Moreover, the Takefuji problem (Takefuji's filing for bankruptcy protection) occurred last year. In light of that, we must appropriately deal with this issue from a comprehensive perspective

(End)