Press Conference by Taro Aso, Deputy Prime Minister, Minister of Finance, and Minister of State for Financial Services

(Excerpt)

(Tuesday, October 18, 2016, 8:48 am to 8:55 am)

[Questions and answers:]

Q.

There has been an incident of fraud in which a Sumitomo Mitsui Banking Corporation employee manipulated the bank’s foreign exchange trading system for personal gain. Minister, you have talked about a shift in the administrative approach by the Financial Services Agency from one focusing on an administrative disposition to one focusing on supporting the growth of the financial system. On the other hand, I think this incident has highlighted the need for measures to have banks bolster their internal control systems. Please explain your view on this.

A.

When a scandal happens, our basic stance as a financial supervisor is to have the financial institution in question address the issue in a proper manner. When you look at the developments in the financial industry since the 1997 Asian financial crisis, jusen housing-loan corporations and Hokkaido Takushoku Bank, Sanyo Securities, Yamaichi Securities went bankrupt, followed by the failures of Long-Term Credit Bank of Japan the next year and Nippon Credit Bank in the same year. What I want to say is, so many banks were thrown into confusion, and the changes that took place were so drastic that there are only about two major banks that are still operating under the same names. The banks’ operations were hugely affected, to the extent that they had to undergo drastic changes in their operations. We didn’t want to see our banks degrade into institutions unworthy of trust. And we had a period when we went all-out to basically prevent banks from going under. But just when our efforts were paying off, in 2008 another crisis hit. So all this background has led the FSA to tighten its supervisory function against risks it saw during these periods. But times have changed. Micro, Small and Medium-sized companies now have a stronger need to borrow, but there is criticism that financial institutions are not responding to such needs by making loans readily available to them. Given a situation like this, the FSA must shift its approach and encourage financial institutions, especially small-to-medium ones, to properly address such needs. These institutions shouldn’t just rely on collateral in making lending decisions–they aren’t pawnbrokers in the first place. What the FSA must do, then, is to help financial institutions grow into lenders that are able to give due consideration to the borrower’s actual operational status and growth potential, and be ready to take on risk. Unless the FSA can do this, the financial system would soon become unable to meet these needs properly.