Press Conference by the Minister for Financial Services

(Excerpt)

November 18 , 2003

Q.

You have been stressing that the reconstruction plan of ailing companies should not lead to postponing the timing to face the problem. The recent release of the ''Results of the Follow-up of the Special Inspections'' indicated that while 24 out of about 160 companies were downgraded, most of them belonged to four industries -- namely, construction, real estate, wholesale & retail, and other financial services -- and were reclassified as being ''in danger of bankruptcy'' or below. What are your views on these results?

A.

My understanding is that the results of the special inspections have basically revealed that polarization is taking place among debtors, especially among large ones; some of them are making progress in their efforts towards business recovery, while others are experiencing deterioration in their actual business conditions. I can see that some banks are voluntarily making policy decisions to respond to such changes in companies' actual business conditions by taking action to help such borrowers to achieve recovery. It appears that banks' responses are changing.

Basically, such actions have been evaluated from various angles by the ''Special team for Examination of Reconstruction Plans.'' We are now proactively considering how we should reflect the results of the team's evaluation on the bank supervision.

On the other hand, the recent follow-up has shown that losses from the disposal of non-performing loans have decreased by a large magnitude on an aggregated basis, despite the fair number of debtors being downgraded. I regard it as an indication that major banks, as a general tendency, have set aside a somewhat higher level of provisions by the fiscal year ending March 2003. To rephrase, reconstruction should be carried out decisively; we will watch out not to allow reconstruction aimed at postponing the problem. Also, banks should further pursue financial soundness, considering that the level of provisions has increased to a certain extent, as I have just mentioned. I think these two points are especially important from now on.