Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, July 19, 2011, from 8:43 a.m. to 8:52 a.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything particular to report to you.

[Questions & Answers]

Q.

Regarding the capital requirement for G-SIFIs (global systemically important financial institutions, the Financial Stability Board held a meeting yesterday, and Chairman Draghi said the imposition of an additional capital requirement of 1% to 2.5% according to the degree of the importance of a bank has been approved. What do you think of that? It is said that Japan's three megabanks may be designated as G-SIFIs. How do you expect that the three megabanks will be affected by that?

A.

At a plenary meeting of the FSB that was held in Paris on Monday, July 18, consultation papers concerning measures related to G-SIFIs were discussed. I understand that it was announced that the FSB will soon release two papers, one of which describes the methodology for the assessment of the systemic importance of financial institutions and the additional capital requirement, and the other outlines a framework for resolving financial institutions that aims to prevent systemic damage without passing losses on to taxpayers.

As you know, Japan experienced a financial crisis a little more than ten years ago. Based on the painful experience, Japan has developed the world's most advanced legal framework concerning the failure of financial institutions. As some countries are lagging behind, the paper outlining the framework for resolving the failure of financial institutions has been presented.

As to the methodology for the assessment of the systemic importance and the additional capital requirement, I hear that basically, there has been no change in the agreement reached at a recent meeting of the Group of Governors and Heads of Supervision (GHOS), in which, from Japan, FSA (Financial Services Agency) Commissioner Mikuniya and Bank of Japan Governor Shirakawa participated. The FSA has been arguing - I have been saying this for more than a year - that we should aim to adopt a comprehensive policy package, rather than focus on additional capital requirements. It may seem that the more capital banks are required to have, the safer they are. However, from my experience of Japan's financial crisis, I know of a case in which that caused a credit crunch. In my electoral district, my hometown of Kitakyushu City, two large department stores failed because of that, as I have often mentioned. To prevent such a situation, I have been arguing that keeping the overall balance is essential and that we should aim to work out a comprehensive policy package. Also important is to adopt a balanced regulation that reflects the degree of risks to which individual G-SIFIs are exposed. In that respect, the consultation papers largely reflect Japan's position, so it deserves high regard.

As for the impact on Japan's three megabanks, there is an agreement that the policymaking authorities should not make any announcement as to which specific banks will be designated as G-SIFIs. As that is an international agreement, I cannot make any comment.

In any case, the proposed measures concerning G-SIFIs as a whole will be subjected to public consultation by the end of July and a conclusion is scheduled to be reached before the Cannes summit to be held in November this year. The FSA will continue to be actively involved in the debate on this matter.

Q.

The Japanese Bankers Association announced the Guidelines of Workout for Restructuring Debt Owed by Individual Debtors last Friday. What problems do you think there are?

A.

As to the Guidelines of Workout for Restructuring Debt Owed by Individual Debtors, a study group comprising representatives from the financial industry, associations of small and medium-size enterprises (SMEs) and the legal and academic circles was established with the Japanese Bankers Association as its secretariat, in response to the government's announcement of its policy for dealing with the double loan problem on June 17. On July 15, the Guidelines of Workout for Restructuring Debt Owed by Individual Debtors was worked out after consultations among the relevant parties, as I understand it. I would like to pay respect to the relevant parties for their efforts to quickly work out the Guidelines. I believe that it is important that necessary preparations be made to ensure smooth application of the Guidelines.

The FSA hopes that the use of the Guidelines will facilitate the process of debt workout for individuals who cannot repay existing debts due to the impact of the Great East Japan Earthquake and will contribute to the rebuilding of lives and businesses by debtors through their self-help efforts and to the reconstruction and revitalization of the disaster areas.

Let me point out one thing. The secretariat, which is managed mainly by the Japanese Bankers Association, includes, as observers, representatives from the FSA, the Ministry of Economy, Trade and Industry, the Ministry of Agriculture, Forestry and Fisheries, the Ministry of Land, Infrastructure, Transport and Tourism, the Ministry of Health, Labour and Welfare, the Ministry of Justice, and the Ministry of Finance, among other government organizations.

Q.

Now that the outline of measures related to G-SIFIs and the framework of the Basel III have been fixed, the focus of attention is expected to shift to what standards will be applied to domestic banks following the introduction of the international standards. By when and with what stance are you going to work out the standards?

A.

I hear that a final decision will be made at the Cannes summit. Once an international agreement is reached, the usual course of action, administratively and politically, is to take various domestic measures accordingly. However, for the moment, we have not yet considered specifics.

(End)