Press Conference by the Minister for Financial Services

(Excerpt)

May 27 , 2003

Q.

Yesterday financial reports as of the end of March 2003 were disclosed by major banks. All banks are in the red, but after a closer look into these figures, I noticed differences among the individual banks. How do you evaluate these reports?

A.

I think that these banks continued strenuous efforts to get rid of their non-performing loans (NPLs) under a very severe situation. They also disclosed their outstanding amount of NPLs. In the aggregate, the amount was down 15.5% below the level for the term ended September 2002. Especially disposal of ''in-danger-of bankruptcy loans'' has been under way according to so-called ''the two- or three -year rule''. Therefore, under ''in-danger-of-bankruptcy loans etc.'' have been reduced considerably by 29%. As a result, NPL ratios of these banks dropped to 7.2%, a decrease of about 0.9% in the latter half of the FY 2002. We wish that their NPL ratios be almost halved by the end of FY 2004. The performance of the banks disclosed yesterday, by simple calculation, seems to demonstrate that this objective can be achieved if their pace is maintained.

Total losses from disposal of NPLs amounted to 4.9 trillion yen. It included an additional expense of 0.8 trillion yen due to further write-offs regarding large debtors examined in this round of special inspections, as well as the impact of expense, which the application of DCF type method in calculating necessary level provisioning totaled 0.7 trillion yen. This suggests that the assessment of bank assets has become increasingly tighten. Even with these factors at work, the level of losses from disposal of NPLs has practically come down within that of net operating profits before provisioning.

From the major banks' account-closing figures, the Financial Services Agency gladly noticed a sign of progress on schedule in their NPL disposal toward the objectives under the Program for Financial Revival owing to their efforts for accelerating disposal of NPLs. The banks are expected to speed up the disposal further, and we will continue proper supervision accordingly.

Q.

Resona's case had the effect of drawing attention to deferred tax assets (DTAs) anew. Looking over the account-closing figures disclosed yesterday, I noted that DTAs still account for around 50% of the capital of major banks. Many of us cannot help suspecting that the quality of their capital is still inadequate. What do you think of it?

A.

What you have just pointed out is true. That is why the importance of discussion of DTAs is stressed in the Program for Financial Revival worked out half a year ago. It is obvious that the issue cannot be resolved in half a year or one year.

The issue is deliberating by experts in the Working Group of the Financial System Council. We will take the necessary steps, if any, keeping watch over the progress of their deliberation.

One solution that came into my mind is related to tax including refund carry-back. We are on the side that demands tax, however, we will continue to act, keeping it in mind.