Press Conference by Shozaburo Jimi, Minister for Financial Services

(Excerpt)

(Tuesday, September 20, 2011, from 11:21 a.m. to 11:39 a.m.)

[Opening Remarks by Minister Jimi]

Today, I do not have anything particular to announce.

[Questions & Answers]

Q.

There is no sign of concerns over the European financial sector subsiding as Greece, the flash point of the financial crisis, is flirting with the possibility of breaking away from the euro. How large is the amount of Japanese financial institutions' loans to and transactions with Greece and what impact do you expect on their management?

A.

I have read a news article estimating the amount of outstanding loans provided by the three megabanks at 1.9 trillion yen, which is equivalent to 1% of their total loan amount. However, the Financial Services Agency (FSA) will refrain from commenting on the loan balance of specific financial institutions.

At any rate, the FSA will carefully monitor market developments and will continue to supervise financial institutions with a high level of alertness from the perspective of whether they are properly conducting risk management.

Q.

It is said that Japan Post Bank is set to join the Japanese Bankers Association next month at the earliest. Does that mean Japan Post Bank will seek to survive as a purely private company? What is your response to that?

A.

I hear that Japan Post Bank has sounded out the Japanese Bankers Association about the possibility of obtaining its membership in order to strengthen its information gathering capability so that it can take more responsible actions from the perspective of protecting users in relation to “furikome” fraud and money laundering.

I understand that it is up to the Japanese Bankers Association to decide whether or not to approve membership and what its membership should be like.

Q.

I am Oshima from Kinyu Times. It seems that there are too many banks in Kitakyushu. What is the purpose of establishing a new bank there?

A.

Regarding the granting of a banking license to Kitakyushu Bank, we have rigorously screened the bank's application for the license in accordance with the screening criteria prescribed by the Banking Act. We granted the license to the bank on Friday, September 16.

The FSA hopes that the new bank will contribute to the facilitation of regional financing, improvement of convenience for customers and local revitalization by providing financing carefully tailored to local needs.

Q.

I am Namikawa from Toyo Keizai.

Perhaps my question is related to the matter that was mentioned just now. As Japan is crowded with commercial banks, the financial sector apparently has not been diversified. Don't you think that private funds have not been circulating since the earthquake disaster because of a lack of diversification?

A.

That is a difficult question. As the head of the FSA, I visited Ishinomaki City immediately after the earthquake. I met with the presidents of regional banks, Shinkin banks and credit cooperatives in the Tohoku region, and in particular, I have been strictly instructing the Director-General of the Tohoku Finance Bureau and the current and former Directors-General of the Supervisory Bureau, as well as the Directors of the Banks Divisions I and II to keep a careful watch on financial institutions in the Tohoku region. From that viewpoint, we have enacted the amended Act on Special Measures for Strengthening Financial Functions.

The amended Act on Special Measures for Strengthening Financial Functions was enacted when we faced a once-in-a-millennium crisis, so the businesses of small and medium-size enterprises borrowing from regional financial institutions and the lives of people depend on this law. Therefore, it was passed unanimously on June 22 in the previous Diet session.

Regarding the overall financial policy, as this is a once-in-a-millennium earthquake, emergency measures related to earthquake insurance, for example, should be taken in an emergency like this, as I have stated in the Diet on several occasions. The General Insurance Association of Japan, for example, provided very vigorous cooperation. Usually, assessment of the extent of damage is very important for non-life insurance. This time, one of the association's member companies has undertaken the assessment of damage based on aerial photographs. As you know, the estimated amount of earthquake insurance claims paid, mainly in the six prefectures of the Tohoku region, is 1,200 billion yen, with the amount for Miyagi Prefecture alone at 520 billion to 530 billion yen, according to a recent newspaper report. The chairman of a bank with nation-wide operations recently paid me a courtesy visit after being elected at the general shareholders' meeting and told me about an increase in deposits at his bank's Sendai branch. I was pleased to hear about that. Funds are necessary for reconstruction, and we must take many policy measures. I do not expect that any single measure alone would get the economy going smoothly.

One of the measures we have taken is the enactment of the amended Act on Special Measures for Strengthening Financial Functions and another is the request for cooperation from the General Insurance Association of Japan. While those are within the jurisdiction of the FSA, policy-based finance schemes are operated by the Ministry of Economy, Trade and Industry/the Small and Medium Enterprise Agency, the Ministry of Agriculture, Forestry and Fisheries, and the Ministry of Land, Infrastructure, Transport and Tourism, which is responsible for housing-related matters. Moreover, the jurisdiction over the double loan problem is shared among the Cabinet Secretariat, the FSA and the Ministry of Finance. As was mentioned in the Diet repeatedly, the Cabinet Secretariat acts as a coordinating office. Of course, private companies are also working very hard. The supply chains have been restored more quickly than we expected. Both private and public sectors should do their part, and as they have their respective advantages and disadvantages, we will strive toward post-earthquake restoration and reconstruction through the best mix of the public and private sectors.

In relation to the SME Financing Facilitation Act in particular, I have instructed financial institutions to properly exercise their consulting function. We have included in the guideline for supervision a provision stipulating that financial institutions should properly exercise the consulting function, rather than merely performing their conventional functions. I believe that we need to take every possible policy measure. As I am mainly responsible for supervising private financial institutions, I will do my utmost toward restoration and reconstruction while listening to your opinions.

Q.

Thank you.

It is natural that if banks' capital bases are strengthened, their deposit-absorbing ability will increase. That indicates that the enactment of the amended Act on Special Measures for Strengthening Financial Functions has produced results. However, as a result of the payment of earthquake insurance claims, regional banks and other financial institutions in the Tohoku region have come to hold a considerable surplus of deposited funds while they are finding it difficult to provide loans. As the environment is not favorable for the provision of loans, they have an excessive surplus of deposited funds.

In short, money has been accumulated at those financial institutions, so I think that how to make use of the accumulated money is the key point when a new financing mechanism is established. What are your thoughts on that?

A.

As you know well, there are problems other than financial problems, such as that urban development plans have not been formulated by the national, prefectural and municipal governments although people wish to rebuild houses and reopen factories. All of these problems involve government organizations. While I am in charge of private financial institutions, I hear that some progress has been made in the disposal of rubble, an issue over which there has been severe criticism. The greatest problem is, as I mentioned, that while there may be reconstruction plans at the municipal level, full plans have not been formulated at the prefectural level, for example, as we are still halfway through the post-earthquake restoration and recovery. Although there is much criticism, I believe that on the whole, substantial progress has been made compared with half a year ago.

If a surplus of funds is arising temporarily - a phenomenon I have not heard of before - we must do our utmost to facilitate flows of funds. Otherwise, we cannot invigorate the economy.

As I always say, private financial institutions are like locomotives. If we provide fuel, they will run at full throttle. Locomotives cannot climb slopes, so we must give them a push. In that respect, the taxpayer's money and policy-based finance, as well as credit guarantee associations have a large role to play. However, ultimately, it is ideal that the economy gets moving on its own, and there will be a transition period before that. While carefully evaluating the situation, I will take appropriate measures in a timely manner, as I am planning to visit the disaster areas again.

(End)