Press Conference by Ikko Nakatsuka, Minister for Financial Services

(Excerpt)

(Friday, November 16, 2012, from 9:40 a.m. to 9:59 a.m.)

[Questions & Answers]

Q.

The other day, it was announced that Japan Post Insurance has failed to pay some insurance benefits. How do you think this will affect the examination conducted by the Financial Services Agency (FSA) concerning Japan Post Insurance's new services?

A.

Regarding Japan Post Insurance's failure to send adequate notices concerning insurance claims, I am aware of Japan Post Insurance's announcement on November 13 that it would review past claims for insurance benefits and start efforts to provide adequate notice to customers.

As for the effects of this announcement on the examination concerning new services, the FSA places the top priority on the protection of insurance policyholders. In this respect, the FSA has also been asking other insurance companies to ensure the protection of policyholders. I sincerely hope that Japan Post Insurance will win the trust of policyholders and the general public. Therefore, I would like the company to become able to do the same things as other insurance companies.

Q.

In relation to Japan Post Insurance, you said that you would like the company to become able to do the same things as other insurance companies. Do you mean that unless Japan Post Insurance develops systems to enable it to do so, you cannot approve its new services?

A.

As I always say, there are two sets of administrative procedures that must be followed. Under the Postal Service Privatization Act, we must examine whether or not the introduction of the new services will prevent the provision of appropriate services to users. The failure to provide adequate notice concerning insurance claims is exactly an issue that concerns the provision of appropriate services to users.

At the same time, under the Insurance Business Act, we must examine whether or not the protection of policy will be ensured. In that sense, too, we will naturally need to take account of the failure to provide adequate notice concerning insurance claims.

Q.

Could you offer any frank comments on the failure to provide adequate notice concerning insurance claims and tell me about the possibility of the FSA taking an administrative action?

A.

We feel great regret to see the failure to provide adequate notice concerning insurance claims. As for administrative action, I would like to refrain from making comments.

Q.

May I take it that you will deal with the case in accordance with law?

A.

I would like to refrain from making comments on specific administrative actions.

Q.

The most significant policy measure related to the FSA that has been taken since the Democratic Party of Japan (DPJ) came to power-although it is not clear whether it is the DPJ's own policy measure-is the enactment of the SME (Small and Medium-size Enterprise) Financing Facilitation Act, which is widely known as the “moratorium law.”

Some people have pointed out negative side effects of this law. There are various criticisms, such as that it has expanded the ranks of companies doomed to fail and that it has weakened the regeneration process of the Japanese economy. Do you think that the enactment of this law is something that can be upheld proudly as an achievement?

A.

Regardless of the SME Financing Facilitation Act, regional financial institutions have accepted requests for modification of loan terms.

The enactment of this law has helped to promote this initiative further. Given that financial institutions have accepted 90% of the modification requests, the enactment of this law is a very significant achievement.

On the other hand, there are such criticisms as you have mentioned. Therefore, we will maintain the current inspection and supervisory approach to financial institutions' modification of loan terms. There will be no change in our policy that modified loans should not be classified as non-performing loans. We hope to ensure that the modification initiative, which has been promoted by this law, continues as a permanent effort. In a sense, this represents a change in the business model of financial institutions.

Meanwhile, recently, 80% of the borrowers whose loan terms have been modified are being granted a modification for the second or third time. While the modification initiative will be continued, it alone will not improve the situation. We must make increased efforts to support companies whose situation will improve if they receive consulting. Therefore, we have been promoting our policy package since April.

Furthermore, this was included among the priority matters under the economic package that the prime minister instructed us last month to work out. Today, the prime minister mentioned the economic package again.

In that sense, the enactment of the SME Financing Facilitation Act is an achievement, and we also intend to redouble our efforts to support the business turnaround of SMEs in addition to implementing the measures based on the law.

Q.

I am Sonoda from The Tsushin-Bunka Shinpou.

In relation to Japan Post Insurance, seven years ago, when 37 life insurance companies were found to have failed to pay some insurance benefits, the FSA issued a business improvement order in most cases. Only Meiji Yasuda Life Insurance received a severe punishment. The difference was whether the non-payment was due to negligence or an intentional act.

Meiji Yasuda Life Insurance was severely punished as it was pointed out that the company's non-payment was intentional. In the case of Japan Post Insurance, the situation is apparently different. The other 37 life insurance companies have not been prohibited from introducing new services since then. Could you offer your thoughts on that point?

A.

I will refrain from commenting on specific administrative actions.

As I said earlier, we believe that it is very important to protect policyholders. Therefore, we should naturally take account of this case when considering whether to approve new services.

Q.

During the past eight months of communications between the FSA and Japan Post Insurance, there was apparently an instruction that this problem should not be made public. It seems somewhat strange that the problem has come to light at this time. What would you say to that?

A.

In September, we issued an order for the submission of a report based on Article 128 of the Insurance Business Act. In October, Japan Post Insurance submitted its first report.

I am not aware of an instruction restraining the disclosure of the problem. The reporting to the privatization committee is a matter regarding which Japan Post Insurance itself should make judgment.

Q.

During a press conference, Chairman Nishimuro of the postal privatization committee received a hastily-written memo from a staff member and read it aloud, stating that the problem could not be disclosed because of a confidentiality contract.

In short, my question is this. Although the order for the submission of a report was issued in September, Japan Post Insurance did not report to the privatization committee, which is conducting examination concerning the new services, on the contents of its report. When asked to comment on that, Chairman Nishimuro read aloud the memo stating there was a confidential contract. Are you denying that statement?

A.

As I said earlier, I am not aware of that. Generally speaking, Japan Post Insurance is an ordinary life insurance company subject to the Insurance Business Act. It is not under any particular obligation of confidentiality.

In any case, how Japan Post Insurance should report the non-payment of insurance benefits to the postal privatization committee is a matter regarding which the company should make judgment itself. The FSA refrains from making comments.

(End)