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（provisional translation)

Financial Reconstruction Commission

Basic viewpoints and results of the examination with regard to the capital injection for the applicant banks
(Summary)

I.	Circumstances of the work

-	Spent thirty-two days of relevant work in total.
-	Held hearings from the Financial Supervisory Agency and the Bank of Japan on the findings from their on-sight inspection of major banks.
-	Had through hearings from the presidents of the applicants banks.

II.

Basic Viewpoints

1.	Principles

Aim to complete disposition of bad debts at the banks with the capital injection, to ensure domestic and foreign confidence sufficiently, and to restore trust in the Japanese financial system.　
Aim to revitalize the economy through smooth flows of credit.
Aim to improve the competitiveness and profitability of the banks with the capital injection, through which to recover invested funds as early as possible.

2.	Soundness of the financial positions (even before the injection)

All of the applicants banks fell in the category of “sound bank” at the end of September 1998. Even before the capital injection to be carried out at the end of March 1999, they are sure to secure enough own capital by its self-raising or due to the net operating profit.

3.	Amount of the capital injection

Major banks are expected to substantially complete the disposition of bad debts at the end of March 1999 through sufficient write-offs and provisioning.
They are also encouraged to dispose unrealized losses from securities holdings as early as possible with the introduction of mark-to-market accounting (in March 2002) in sight.
Coupled with the net operating profit and self-raised capital from the private sector, they seek for the capital consolidation using government guarantees. By these measures, they should be able to ensure an adequate size of capital balance, even after taking account of the amount of debt disposal and unrealized losses from securities holdings .
Also, they are sure to increase credits for domestic enterprises, especially for medium and small-sized ones, thus addressing the problem of credit crunch.

4.	Plan for restoring sound management

The applicant banks are to improve profitability or conduct fundamental reform of organization based on clear and specific strategies. In particular, withdrawal from non-profitable business fronts including overseas activities is highly evaluated.
Furthermore, they are to make such efforts of rationalization (“risutora”) as the cutdown on fixed costs including personnel expenses, with a view to building a wasteless and strong basis of management and to improving profitability. An abolition of the posts of senior counselors and advisors is appreciated.
With regard to financial realignment, practical efforts are being undertaken, such as mergers, subsidiarization, and tie-ups in terms of capital consolidation or business operations.
Such measures as dividend cut and reduction in directors' bonus will sufficiently restrain the drain of profit.

5.	Characteristics of instruments

Dividend yields are specifically decided as set forth below:

(i)	Assumed are the valuation by markets which considers each bank's profitability and funding ability. Japan premium is presumed to be nonexistent.
(ii)	Dividend yields are to be calculated in accordance with ordinary market practices, which are to be applied to each instrument individually.
(iii)	Dividend yields reflect a certain set of evaluated elements, taking account of expected improvements in management conditions to be brought about by the measures of business restructuring, rationalization (“risutora”), and financial realignment which are incorporated in the plan for restoring sound management.

III.

Results of the examination and the follow-up procedure

The FRC has concluded that it is appropriate to approve the applications by the major banks for the public capital injection, after a thorough examination of their contents including the plan for restoring sound management.
The FRC will follow up with the implementation of the plan of each bank, by ordering submission of relevant reports according to the Financial Function Early Strengthening Law (Article 5, Section 4) and disclosing them to the public. Then, as necessary, it will take appropriate actions according to the Law (Article 20, Section 2) in order to ensure proper implementation of the plans.

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