Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Friday, May 13, 2011, from 8:55 a.m. to 9:02 a.m.)

[Opening Remarks by Minister Jimi]

Regarding my statement titled, “Ensuring Financial Functions after the Great East Japan Earthquake,” in light of the risk that the earthquake disaster will have various effects on financial institutions in the future, we will submit a bill to amend the Act on Special Measures for Strengthening Financial Functions to the Diet in the belief that it will be appropriate to (1) maintain and strengthen regional financial functions in a comprehensive manner and (2) establish a solid framework that reassures depositors.

Specifically, the period of application for governmental capital injection will be extended for five years, and when a financial institution damaged by the earthquake disaster seeks to receive a governmental capital injection, we will provide special treatments applicable to the disaster areas, such as: (1) the responsibility of managers will not be pursued; (2) the setting of specific goals for profitability, efficiency, or other benchmarks will not be required; and (3) the cost of governmental capital injection will be reduced compared with in normal times.

As for cooperative-type financial institutions, in light of the fact that their business base is geographically limited and they are institutions operated by members while their central organizations play a leadership role, we will provide the following special treatments that are suited to their characteristics. (1) Cooperative-type financial institutions whose future financial condition is uncertain because they have suffered disaster damage or because they have a substantial amount of outstanding loans to disaster victims may receive joint capital injection from the government and their central organizations. (2) Central organizations will provide guidance on the management of financial institutions which have suffered disaster damage. (3) If the write-off of carried-over losses has become necessary due to future business restructuring, deposit insurance funds, for example, may be used to liquidate injected capital.

We believe that these special treatments will ensure the exercise of regional financial functions and fully protect deposits.

We are preparing to write a relevant bill and submit it to the Diet by the end of this month. I will inform you of the details when the bill is submitted.

That is all I have to say.

[Questions & Answers]

Q.

Regarding the Act on Special Measures for Strengthening Financial Functions, am I correct in understanding that the government is resolved to prevent the failure of financial institutions in the disaster areas?

A.

Today, I introduced the disaster victims' double loan problem for discussion again. In relation to this problem, the government will take special measures regarding cooperative-type financial institutions, in addition to the special treatment applicable to disaster-stricken ordinary financial institutions, in accordance with the forthcoming amendment of the Act on Special Measures for Strengthening Financial Functions. The special treatment will allow Shinkin banks and credit cooperatives to conclude management guidance contracts with their central organizations so as to enable the government and central organizations to jointly make capital injection into cooperative-type financial institutions whose future financial condition is uncertain due to the impact of the Great East Japan Earthquake. Capital injection made through this scheme will make it possible to maintain the financial soundness of credit cooperatives, leading to the full protection of deposits. This is a special scheme as you know, so financial institutions must enhance their financial intermediary capability in order to support the restoration and reconstruction of the disaster areas. As there are various types of financial institutions, such as Shinkin banks, credit cooperatives, and regional banks, it is necessary to take appropriate measures suited to each of them.

Q.

Since last week, you have participated in discussion on the scheme for damage compensation for the nuclear power station accident of Tokyo Electric Power as a relevant cabinet minister. Could you comment on that scheme?

A.

The most important thing to do is to provide appropriate damage compensation quickly. Second, at today's informal meeting of cabinet ministers we approved the framework of compensation for the damage inflicted by the nuclear accident in order to stabilize the situation of the nuclear power station, avoid harmful effects of the handling of the accident on business operators, and ensure the stable supply of electricity, which is essential to the people's lives. I understand that the specifics of the compensation scheme will be worked out within the government under the leadership of Minister Kaieda, who is in charge of dealing with the economic damage inflicted by the nuclear accident.

In any case, the basic premise regarding Tokyo Electric Power's compensation issue is that appropriate damage compensation should be made quickly and that the stable supply of electricity should be ensured. In that sense, as I stated in the Diet, the FSA believes that it is important to ensure the stability of the financial and capital markets as a whole and avoid unexpected harmful effects. In particular, corporate bonds issued by Tokyo Electric Power account for around 5 trillion yen of the total value, around 60 trillion yen, of the corporate bond market. In addition, other electric power companies are also issuing corporate bonds. Tokyo Electric Power issued corporate bonds totaling nearly 200 billion yen in the euro-zone bond market. Corporate bonds are governed by international market rules, so we will continue to pay particular attention to market developments.

(End)