Press Conference by Shizuka Kamei, Minister for Financial Services

(Excerpt)

(Friday, March 19, 2010, from 8:45 a.m. to 9:09 a.m.)

Q.

In relation to Japan Post, do you plan to announce on Wednesday (March 24) any support measures for "shinkin" banks, credit cooperatives and second-tier regional banks at the same time (as the announcement of the plan for reforming Japan Post), such as the easing of inspection criteria for "shinkin" banks and credit cooperatives?

A.

I have ordered a revision of the (inspection) manual. In particular, it is necessary to conduct a review of the inspection criteria for small and medium-size financial institutions that help to preserve local communities. The review should be made in ways that best match actual circumstances, which is also true to that the review of the inspection criteria for Japan Post Bank and Japan Post Insurance. Late last year, we revised the financial inspection manual. However, the current situation in which financial institutions are scrambling to prepare a lot of documents and materials for the inspection needs to be improved. In particular, small and medium-size financial institutions are bearing a considerable burden. I have told FSA (Financial Services Agency) inspectors to focus not only on the figures and data indicated in documents but to acquire the capacity to be able to look at what lies behind the data. I have told them that they cannot perform the role of inspectors unless they are capable of judging whether financial institutions are fulfilling their social function, rather than simply determining whether their balance sheet is improving or deteriorating based only on numerical data. From this perspective, it is better to change the practice of requiring the provision of excessively detailed data and explanations. Therefore, I have instructed that at the same time as the review of the inspection of Japan Post's financial businesses is carried out, the inspection of small and medium-size financial institutions should also be reviewed. I am expecting a radical revision.

The revision will affect second-tier regional banks and smaller financial institutions, rather than all financial institutions such as the megabanks.

Q.

It is said that in addition to the Japan Post Bank some private-sector financial institutions sometimes terminate contracts with contract workers who have failed to achieve their performance target (numerical quota) before the workers can even say something. When that matter was taken up at a Diet session last week, Senior Vice Minister Otsuka said the FSA will make sure to prevent such a practice.

A.

Although it is natural to set some performance targets, increasing sales of financial products by setting excessive targets (numerical quotas) will eventually cause innocent investors to suffer losses. These kinds of side effects arise in addition to the problems involving the protection of the workers' human rights.

If too many financial incentives are offered or an excessive target is set... In the United States, restrictions on manager's pay are being introduced. Company owners might offer managers, for instance, half of the profits the managers would earn. When managers manage their companies based on such incentives, they may try to earn quick profits by developing very risky products. Then they retire as they see fit. Unless each company considers how to enhance its ethics so as to prevent this style of management, I think, the company cannot be sustained for a long time.

(End)