Press Conference by the Minister for Financial Services

(Excerpt)

September 27 , 2005

Q.

Intra-party proceedings commenced this morning with the aim of submitting the bill to amend the Banking Law at the upcoming special session of the Diet. Please describe once again the purpose of the bill and what kind of user convenience will be brought about by the bill. Also, as the discussions between the ruling parties are likely to continue, what is the outlook for the days ahead, such as the schedule?

A.

As you know, the bill for the amendment of the Banking Law involves organizing necessary systems including reviewing the bank agency system, with the aim of improving user convenience of financial services and contributing to improvements in the managerial efficiency of banks and other financial institutions. For this reason, we believe the bill is about the revision of important systems aimed at making further improvements in user convenience, so we will have discussions with members of the ruling parties and endeavor to have the bill submitted to the Diet as soon as possible. As we are in the middle of the ruling parties' proceedings, as just pointed out, and because it is extremely important to have extensive discussions with members of the ruling parties, we cannot talk about any schedule at this stage yet. We will conduct a study in a thorough fashion.

Q.

Last week, the FSA announced the rules for the cap on deferred tax assets in calculating capital adequacy ratios of large banks, which has been a topic of heated debate since the days of the Program for Financial Revival. What is your position on this? It was even referred to as a poison back in the day, but a great deal of attention appears to have been paid to the management capacity of banks upon introducing the rules. Has its meaning changed? Your comments on this will be highly appreciated.

A.

A crucial challenge that remained under the Program for Financial Revival was the issue of proper regulatory treatment of deferred tax assets, so it was addressed in the Program for Further Financial Reform and in the work schedule. As just mentioned, this has been a topic of heated debate since the formulation of the Program for Financial Revival. As one of the three major keys to realizing a sound financial system, we discussed the issue from various angles in the context of capital enhancement, followed by discussions at the Financial System Council, which led to the submission of the report.

In response to fulfilling the target of halving the percentage of non-performing loans (NPLs) under the Program for Financial Revival, we conducted a thorough study in consideration of the gist of the report, and issued a public comment titled ''Draft Ministerial Notification on Proper Regulatory Treatment of Deferred Tax Assets under Capital Adequacy Regulations for Major Banks.'' We believe the latest measure will help further stabilize the Japanese financial system by making qualitative improvements in capital adequacy.

(End)

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