Press Conference by the Commissioner

(Excerpt)

18 February, 2002

Q.

The U.S.-Japan summit meeting has just been closed, and we've heard that the structural reforms and acceleration of disposal of non-performing loans (NPLs) were discussed at the meeting. If the Financial Services Agency is going to take a more aggressive approach, what measure would be taken? In particular, with regard to re-injection of public funds which is attracting attention from the public. Minister Takenaka said last weekend ''it may be done during March,'' and some people call for even preventive injection. Under these circumstances, what is FSA's view about this issue?

A.

I have not yet been informed concretely of what discussions were made at the summit meeting. As you know from the joint press conference after the talk, Prime Minister told that the structural reforms including removal of NPLs toward revival of the Japanese economy are steadily advancing, and that he keeps the stance to continue addressing the structural reforms with strong determination. In response to Prime Minister's explanation and his determined attitude, President Bush expressed strong encouragement and support. This is my impression.

From the standpoint of FSA, the structural reforms mean the structural reforms of the financial sector - more specifically, acceleration of removal of NPLs. Concerning this point, Prime Minister gave specific instructions to Minister Yanagisawa, and we believe we have worked in this direction. We will continue to tackle this challenge more rigorously, following Prime Minister's instructions.

Regarding injection of public funds, I believe that, first of all, measures provided under the item(1), Article 102 of the Deposit Insurance Law including capital reinforcement are the countermeasures against a financial crisis, and should be taken only when there is a threat of a financial crisis.

Second, as for major banks, FSA is currently carrying out inspections including special inspections toward the end of March. Also, we are carefully watching trends of the stock market and various other financial markets. At present, we do not see any sign of a financial crisis.

Third, in any case, if we identify any problem in the soundness of financial institutions and find the necessity in light of laws and ordinances, we will take every possible measure, including capital reinforcement, to secure the stability of the financial system.

These are the current views of FSA on this issue.

As for the question about the remark by Mr. Takenaka, Minister in Charge of Economic and Fiscal Policy, as long as I judge from his speech at today's Diet session, Mr. Takenaka did not mean for sure that injection of public funds will be made in March.

Q.

I suppose FSA is considering when and how the results of special inspections should be disclosed. Please tell us the currently fixed outlines as wel as the direction, to the extent you can answer.

A.

Basically at a special inspection, classification of borrowers is discussed among the three parties concerned, which should be reflected in book closing as of the end of March. At present, we expect we will complete the special inspection for all the subject companies sometime very close to the end of March.

However, there may be the case where all the classifications are agreed by the three parties much earlier than that. Therefore, it is very difficult for us to predict when we complete the special inspection. We just expect all the subject companies will be classified by sometime within March. FSA will sum up results and disclose them in some format.

The significance of the disclosure is to gain confidence of the public in FSA's inspections, and ultimately secure confidence in disposal of NPLs. So we believe we should disclose.

On the other hand, however, since the special inspection is carried out on selected borrowers that fall under a certain conditions, we must prevent the subject borrower companies from being exposed to reputational risks, as we have repeatedly said.

Although these two elements are slightly contradictory to each other, we are going to disclose by managing to get through the narrow path. As for ''when'' to announce the results, we can say that the disclosure will be made as soon as the inspection results are summed up. But when it comes to ''how'' to announce the results, we can only say that discussions are still underway while taking into account the two contradictory aspects.

Q.

Regarding the disclosure to be made sometime in March, will it be possible to consider them as final figures? Also, Minister Takenaka suggests that decision about the injection of public funds should be made based on these figures. Is it possible to expect that FSA will bring out the results solid enough to back up such significant decision?

A.

Not only the results of special inspections but also those of regular inspections that are currently underway will be reflected in book closing as of the end of March. Therefore, the soundness of a bank will not be judged depending only on the results of the special inspections but also on the results of various other inspections and banks' self-assessment. Considering all these results, FSA will take every possible measure to avoid any financial crisis if deemed necessary in light of laws and ordinances.