Press Conference by the Minister for Financial Services

(Excerpt)

October 10 , 2003

Today, Resona Holdings, Inc. announced the revision of the Group's earnings for the interim period and the capital increase for Kinki Osaka Bank and Nara Bank.

Just before the announcement of revisions of earnings, Mr. Eiji Hosoya, the chairman of the Resona Holdings visited the Financial Services Agency (FSA). ''For 100 days since my assumption of office in June,'' Mr. Hosoya explained, ''I have been making efforts to revitalize ''Resona'' and maximize its corporate value. In particular, we have been focusing our efforts on internal reform and transformation for profits led by governance reform. The financial reform which we announce today is the core initiative for transformation for sustainable profits. The financial reform aims at complete elimination of future risk factors through radical revision of the existing management policies, including tightening up policies for affiliated companies and non-bank affiliates, introducing ''provision for business restructuring'', funding retirement benefit liabilities in a front-loaded manner and expanding the application of the discounted cash flow method''.

''You must have had various difficulties in your struggle for Resona's revitalization so far,'' I said. ''The latest financial reform and management reform can be seen as a significant step towards Resona's prompt recovery. It aims on achieving V-shaped recovery by taking an aggressive stance on the closing of accounts. I hope extensive management reform will be implemented continually.''

''In addition to the efforts made so far,'' Mr. Hosoya stated, ''we will make utmost efforts for Resona's prompt recovery, including challenges to create new business models.''

I want to make two comments on this topic. In relation to the massive losses which will be announced today, there could be claims that Resona was insolvent in the year ended March 2003. Mr. Hosoya's explanation on this matter was as follows. ''Our accounts for the year ended March 2003 were closed in accordance with proper procedures under relevant laws and regulations, and were determined as sound by an auditing firm as well. The massive losses announced in this interim period are due to new management policies, which are substantially different from the existing policies. The new management's responsibility is to examine how to repay the 1.96 trillion yen invested by the people, and how to maximize the Resona's corporate value. Based on this view, we radically eliminated future risk factors in advance. In any case, the accounts for the year ended March 2003 were audited by an auditing firm and are deemed properly closed.'' The FSA, including myself, totally shares the same view.

The second point is concerned with the question as to whether the capital increase for banks including Kinki Osaka Bank is inappropriate transfer of public funds injected a few month ago. With respect to the capital increase for Kinki Osaka Bank, Mr. Hosoya stated that ''as a result of the exchange of shares on August 7, Resona Holdings became responsible for the management of the public funds. Resona Holdings acknowledges that it has the responsibility for the people to make the best use of capital within the Group effectively, and maximize the corporate value of the Group as a whole. We have also decided to undertake the capital increase in consideration of our responsibilities under the Banking Law to ensure the soundness of subsidiary banks.''

Further, Mr. Hosoya explained that ''to undertake the capital increase, we will borrow funds from Resona Bank, and the bank plans to use the proceeds from the sale of stocks made in the first half of the year to finance the lending.''

The FSA recognizes that the capital increase, which will be implemented for the purpose of promptly revitalizing Resona Group and maximizing the corporate value of the Group as a whole, will be in the interests of the nation, by increasing the value of Resona's shares hold by the government and by supporting the economy.

Q.

As for the question whether Resona was insolvent at the as of the end of March 2003, and whether the audit by the auditing firm was appropriate, you just stated that Resona was in a sound state, and that you agreed with Mr. Hosoya's point of view. Would you clarify the context in which your views are the same?

A.

As I have stated many times in press conferences previously, there is only one official version of the financial results. Resona's financial results were primarily compiled by itself properly, audited strictly by an independent auditing firm and determined to have been sound. We conducted inspections in the process, namely, de facto resident inspections, and the asset assessments reflect special inspections. It is the only official version of the financial results available, and the financial results, determined to have been sound by an independent auditing firm, indicate that Resona was not insolvent. There is no other version of the financial results.

Q.

Despite injecting almost 2 trillion yen of public funds, Resona made losses nearly equivalent to that amount. Many people are wondering why public funds were used for such a bank.

A.

Some experts claim that that as Resona incurs a loss this September, Resona was insolvent in March 2003. This claim is misleading and should not be made. As I made a comment at the Diet, the value of assets depends on management policy; for example, the value of assets varies significantly, depending on whether they are appraised based on the going-concern assumption under a management policy in favor of sustaining the company, or whether they are appraised for liquidation purposes. In this context, Resona's assets were appraised under new management based on new management policies with an aggressive management stance, taking account of the previous financial results. It is exactly what we call ''adjustments to the balance sheet''. It should be properly understood that it constitutes financial strategy.