Press Conference by Ikko Nakatsuka, Minister for Financial Services

(Excerpt)

(Friday, November 2, 2012, from 9:25 a.m. to 9:39 a.m.)

[Opening Remarks by Minister Nakatsuka]

At an informal meeting of cabinet ministers that followed today's cabinet meeting, I reported that yesterday I issued a ministerial statement (regarding inspection and supervision for the period after the expiration of the SME [Small and Medium-size Enterprises] Financing Facilitation Act) and requested the cooperation of relevant ministers.

[Questions & Answers]

Q.

In relation to the SME Financing Facilitation Act that you mentioned, could you explain again the intent of the ministerial statement?

A.

The SME Financing Facilitation Act is scheduled to expire at the end of next March, so the Financial Services Agency (FSA) has received inquiries from various quarters about its future actions. When I visited various regions, I listened to the opinions of financial institutions and SME associations. For example, I heard concerns that the FSA may change its stance overnight after the expiration of this law in March.

To address various concerns and questions, I clarified the FSA's stance in the form of a ministerial statement regarding the FSA's policy for inspection and supervision for the period after the expiration of the SME Financing Facilitation Act.

Q.

Recently, there have been cases in which users' personal information and passwords were stolen through fraudulent log-in pages that pop up on the screen when trying to conduct Internet transactions using accounts at major banks and Japan Post Bank. At Mizuho Bank, actual financial damage arose. How will the FSA deal with those cases?

A.

I am aware of confirmed cases of financial damage arising from fraudulent money transfers using information stolen through fake log-in pages in Internet banking transactions.

The FSA has asked industry associations to alert member financial institutions to the risk of such fraud. In addition, the FSA and Local Finance Bureaus have directly checked with banks as to the presence or absence of such fraud cases and alerted them to the risk.

The FSA will continue efforts to prevent fraudulent use of accounts while maintaining cooperation with relevant ministries and agencies as well as industry associations.

Q.

Could you tell me about the status of the damage? Also, do you think that there is something wrong with banks' computer systems?

A.

As for the status of the damage, I would like to refrain from making comments since that is a matter concerning specific cases.

As to whether there is any computer system problem, I hope that financial institutions will do what they can to resolve problems.

Q.

Regarding the restriction on banks' capital investment in non-financial companies, the idea of removing the upper limit regarding companies undergoing enterprise turnaround was discussed at a recent meeting of a relevant working group of the Financial System Council. If banks own companies with deteriorating business performance or if companies fail to recover, the business performance of the banks themselves may deteriorate. What is your thinking regarding these points?

A.

I understand that such discussions are being held from the perspective of strengthening the functions of the banking industry and the financial industry. When banks make capital investment in companies undergoing enterprise turnaround under civil rehabilitation plans or under business improvement plans, the investment is in principle based on the expectation that rehabilitation can be achieved.

However, risk management should be properly conducted in that respect as well. I hear that there was an argument that in-depth inspection and supervision should be conducted from that perspective.

Therefore, we will debate this issue with a view to creating an environment that enables financial institutions to fully perform their role as the provider of capital funds while ensuring appropriate risk management.

Q.

I am Inoshita from Toyo Keizai.

Regarding the facilitation of financing, you said that you will ensure thorough awareness about the policy package. What is your evaluation of the status of utilization?

A.

We adopted the policy package in April and held hearings on the exit strategy in May and June. Then, we tried to ensure thorough awareness through briefing sessions in September and October.

I hear that as a result of these efforts, the utilization of the policy package is gradually increasing. In any case, we will try to promote the utilization of the policy package by ensuring wide awareness of its presence and about the plan to continue it beyond next March.

Q.

I have one more question. In many cases, creditors who are utilizing the SME Financing Facilitation Act have claims on loans guaranteed by guarantee associations and they are repeatedly filing applications. In light of that, it seems to me that banks are facing the moral hazard problem. What do you think of that?

A.

In light of such opinions, we have decided to no longer extend the period of the SME Financing Facilitation Act. On the other hand, there are SMEs which may recover if they receive support. I would like you to understand that the policy package has been adopted to support such companies.

Q.

Yesterday, the Financial Stability Board announced an updated list of global systemically important banks (G-SIBs). An additional capital buffer of up to 2.5% will be required, and Mitsubishi UFJ Financial Group of Japan has been moved to the category of banks required to have a 1.5% additional capital buffer from the category required to have a 1% additional buffer, in which it was placed last year. Could you comment on that?

A.

The list was announced previously, and this time, I understand that an updated list allocating G-SIBs into buckets was announced. Of course, I am aware that the FSA has been involved in the debate on the updating.

This is the result of the debate. In the future, we would like to discuss how to meet the new requirements.

Q.

Japanese banks have relatively thick capital buffers. Mitsubishi UFJ has said it already has a core capital ratio of around 9%. In connection to the updating, do you have worries concerning Japanese banks' capital buffers, such as that they may be required to increase their capital?

A.

I do not have such worries. I believe that the recent debate was intended to increase confidence in the financial system. Moreover, I hear that the requirements for additional capital will be met over multiple years. We will make efforts to properly implement international agreements.

Q.

May I take it that you have no particular worries?

A.

That is correct.

(End)

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