Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

May 11, 2007

Q.

By yesterday, four major consumer loan companies had announced their financial statements. They said their losses totaled 1.7 trillion yen. On the other hand, some of them have made moves to lower maximum interest rates on loans before the implementation of the amended Money-Lending Business Control and Regulation Law. Would you give your views about these moves?

A.

First, let me discuss the published losses and other relevant matters. We are aware that these companies have booked heavy losses on provisions for growing claims for refunding of overcharged interest payments, as reported widely. Moneylenders are lowering maximum lending rates and introducing quantitative limits on loans. In fact, their business environment is growing tougher. Major banks are also revising earnings projections downward in view of financial conditions at moneylenders. In the meantime, consumer loan companies or groups have announced various restructuring measures while reviewing their ways of doing business. We will closely watch the process of each company or group in the industry understanding the objectives of the amended Money-Lending Business Control and Regulation Law and developing systems for full compliance with laws and regulations and internal control in order to create or look for new business models. Acom Co., the largest Japanese consumer loan company, has announced a plan to lower the maximum lending rate. This may represent a preemptive action before the implementation of the measures to lower the maximum lending rate. But we see the action as part of a market mechanism based on future projections. Lending rates and other characteristics of loans are left to moneylenders' business decisions. Under the amended Money-Lending Business Control and Regulation Law, the maximum lending rate will be lowered with quantitative restrictions introduced on loans in some three years. Given experiences with the past cuts in lending rates, we view the Acom decision as a preemptive action. In any case, the authorities hope that each moneylender will allow the amended law to be implemented smoothly by reforming their business models appropriately during the preparation period in line with the amended law's objectives including correction of the money-lending industry, prevention of overlending and improvement of the lending rate system.

Q.

Media reports said Lone Star, a major shareholder in Tokyo Star Bank, will sell its stake in the bank to Advantage Partners. An investment fund is selling its bank stake to another fund. The deal may represent an investment exit. But the replacement of a large shareholder in a bank within a short period of time may affect the bank's management. What do you think about this point?

A.

I feel that this kind of deal should be left to business decisions by the relevant financial institutions. Whether investors' actions within a short period of time are speculative or not is difficult to decide. I think that we should not make any easy decision before taking time to watch developments. I hope that the reported sale will lead to sounder bank management.

Q.

You may want to take more time to watch developments. Some reports said Advantage Partners would launch a tender offer for Tokyo Star Bank. Depending on the magnitude of its share acquisition, the bank's eligibility to remain listed on the stock market could be affected. What do you think about the possibility that moves of an investment fund could affect the listing of a bank?

A.

We have not received any report on the real intention behind the reported plan to acquire the bank even through a tender offer. The reported plan is no more than a guess. In this sense, I would like to grasp the realities before making any comment. Generally, an attractive bank may be expected to further enhance its efficiency and profitability through a tender offer. I hope that such action would contribute to development of bank business models and sounder bank management.

(End)

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