Unofficial and Provisional Translation

Readers are advised to refer to the original Japanese text before quoting from this document.

Regarding the Reform of the

Japanese Financial System



- Contributing to the Vitalization of the National Economy -


June 13, 1997

The Financial System Research Council


table of contents

Preface

I. Transforming the Environment for Japan's Financial Sector

II. The Aim of the Financial System Reform

- Contributing to the Vitalization of Japan's Economy

III. Matters that Should be Addressed

- Towards a Market that Clearly Reflects Users' Choice

1. Liberalizing and Diversifying

Products, Businesses, Organizational Structures

2. Preparing the Infrastructure and Rules for Markets and Transactions

3. Securing the Financial System's Soundness

IV. Specific Reform Items

i. Liberlization and Diversification of

Products, Businesses, and Organizational Structures

1. Utilizing a Holding Company System

2. Asset Backed Securities (ABS): Transforming Loans

and Other Assets Into Liquid Forms

3. Derivatives Transactions

4. Sales of Securities Investment Trusts

5. Sales of Insurance Products

6. Reconsidering of the Business Scope

for the Subsidiaries of Entities in Different Financial Industries

and Preventative Measures Against Harmful Effects

7. Abolishing Restrictions on the Short- and Long- Term

Finance System for Commercial Banking

8. The Specialized Foreign Exchange Bank System

9. The Role of Regional Financial Institutions

10. Electronic Money and Electronic Payment Systems

11. Diversification of Non-bank's Funding

ii. Preparing Rules and Infrastructure for Markets and Transactions

1. Financial Futures Transactions

2. The Short-term Money Market

3. The Accounting System

4. Protecting Users

iii. Securing the Soundness of the Financial System

1. Introducing Prompt Corrective Action (PCA)

2. Promoting Reduction of Settlement Risk

V. Legal Matters Involved in the Development of Financial System Reform

VI. Points to be Considered in Promoting Reform

VII. Closing Words

Summery of the Report Regarding the Reform of the Japanese Financial System


[Council Information]

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