Press Conference by FSA Commissioner Takafumi Sato
January 19, 2009
[Opening Remarks by FSA Commissioner Sato]
I do not have any particular statements to make.
[Questions and Answers]
Yesterday, there was a media report that Sapporo Hokuyo Holdings was considering applying for governmental capital injection under the revised Act on Special Measures for Strengthening Financial Functions. Although it may be difficult for you to answer this question as it concerns an individual bank, could you tell us about the current status of the application procedure? Meanwhile, last December, there was a media report that quoted a senior official of this bank holding company as saying that the company was not at all considering applying for public funds. If the company actually makes an application, some people may speculate that the FSA (Financial Services Agency) has strongly leaned on it to do so. What would you say to this? Also, could you tell us about other banks’ future moves if you have any opinions?
I think we should refrain from commenting on an individual bank’s application for the recapitalization scheme under the revised Act on Special Measures for Strengthening Financial Functions or on the status of their deliberation in this regard.
In the first place, the recapitalization scheme based on this Act is intended mainly to support local economies and small and medium-size enterprises (SMEs), which face severe conditions. I would welcome a bank’s deliberation on whether to apply for capital injection based on the revised Act on Special Measures for Strengthening Financial Functions or expression of an intention to make an application, as that would represent a statement of the bank’s commitment to supporting local economies and SMEs by properly exercising their financial intermediary function. In addition, as uncertainty has grown considerably in the global financial markets, it is increasingly important to engage in “forward-looking management” as I have been saying. In this sense, if a bank examines the possibility of increasing its capital as an option and considers the use of the revised Act on Special Measures for Strengthening Financial Functions as a way to do so, it would send a very positive message.
The FSA has held briefing sessions across the nation and made a broad appeal for banks to consider the use of this Act, but ultimately, it is a matter of management judgment, so responsible decisions should be made by the management of individual financial institutions.
On January 16, Citigroup of the United States announced a plan to separate Nikko Cordial Securities and Nikko Asset Management as non-core businesses. Amid the emerging moves toward the realignment of Japan’s securities industry, how do you feel about the current situation?
On Friday, January 16, Citigroup of the United States announced the financial results for the fourth quarter of 2008, namely the October-December period, bringing forward the announcement date from January 22, and, at the same time, unveiled a business restructuring plan that featured the split-up of the group into Citicorp, which engages in core businesses such as commercial and investment banking, and Citi Holdings, which engages in non-core businesses, in light of the current economic and market environments, as I understand it. I also understand that Nikko Cordial and Nikko Asset Management, both of which are based in Japan, will be included among the non-core businesses. On the other hand, while I know that there is speculation about the sale of these two companies, I am not aware of any announcement by Citigroup of a clear policy regarding their future. In any case, as financial groups’ business restructuring moves are a matter that concerns management judgment, I think I should refrain from commenting on a specific case. Also, I would like to refrain from commenting on the realignment of Japan’s securities industry that you mentioned, as it is nothing more than the subject of unsubstantiated media reports.
Generally speaking, amid the ongoing global market turmoil, some major U.S. and European financial institutions booked losses too heavy for them to contain on their own, prompting moves toward business integration and restructuring. As for Japan, the country shows stability compared with the Untied States and other countries as far as the financial sector is concerned. In any case, I believe that it is important that Japanese financial institutions make appropriate management judgments while maintaining appropriate governance and risk management. I hope that by doing so, they will provide high-quality services that are internationally competitive and convenient for customers.
Regarding the revised Act on Special Measures for Strengthening Financial Functions, some people expect that Hokuyo Bank’s announcement may lead more financial institutions to make an application. What is the FSA’s view in this regard?
What I know regarding Hokuyo Bank is that on the morning of Sunday, January 18, the bank issued a press release to the effect that it had not made any decision and would immediately make an announcement if it has made a decision on matters subject to the disclosure requirements.
Generally speaking, it has become very important to engage in forward-looking management, as I said earlier, and properly exercising the financial intermediary function for SMEs which support local economies is the most fundamental role of deposit-taking financial institutions. I hope that they will seriously consider making an application, as it would represent the expression of a commitment to firmly supporting local economies in light of that role.
In relation to the same issue, do you think that the end of March, which marks the end of the fiscal year, would be the appropriate timing for applications for capital injection if banks are to engage in “forward-looking management” in light of the purpose of this Act, which is to contribute to SMEs and local economies, and the fact that this Act was quickly enacted with due consideration to the current conditions of SMEs and local economies?
The end of March will be a critical juncture, as the account books for the full fiscal year 2008 are closed then. However, I think that individual financial institutions themselves will choose the most appropriate timing based on their own deliberations on capital increase plans in light of their own circumstances and from the viewpoint of how to increase their capital smoothly.
- Laws & RegulationsPage list
- Name of Laws and Regulations(PDF)
- Financial Instruments and Exchange Act
- Recent Changes
- Public Comment
- No Action Letter System
- Procedures concerning Foreign Account Management Institutions
- PrinciplesPage list
- Strategic Directions and Priorities
- Progress and Assessment of the Strategic Directions and Priorities
- Policy Approaches to Strengthen Cyber Security in the Financial Sector
- Financial Monitoring Policy
- AnnouncementsPage list
- Press Conferences
- Press Releases
- Official Statements
- Great East Japan Earthquake-Related Information
- The Earthquake Centered in the Kumamoto Region of Kumamoto Prefecture 2016-Related Information
- List of Institutions
- For those engaging in High Speed Trading
- To Operators of Specially Permitted Businesses for Qualified Institutional Investors, etc.