Press Conference by Taro Aso, Deputy Prime Minister, Minister of Finance, and Minister of State for Financial Services

(Excerpt)

(Tuesday, August 29, 2017, 11:07 am to 11:14 am)

[Questions and answers:]

Q.

I think the FSA’s organization reform includes abolishing the Inspection Bureau; please tell us the significance and impact of that.

A.

In 1997, Hokkaido Takushoku Bank failed, and in 1998 the Long-Term Credit Bank of Japan, the Nippon Credit Bank and other large banks failed, alongside such securities companies as Yamaichi and Sanyo. The FSA was established to address the non-performing bank loans stemming from asset deflation that were the key underlying cause of the crisis and to maintain the stability of financial system. In order to do so, the FSA has been examining whether banks are engaged in irregular practices, or not, and penalizing wrongdoers. As you know, capital adequacy ratios and such have now been rectified with Basel III and other regulatory frameworks and, as I have been saying since I took office five years ago, we must adopt a perspective of cultivating rather than punishing financial sector to prevent it from veering away from the essential purpose of finance, so we must now develop our way of supervision better suited to the times. With regard to the Inspection Bureau, we need to consider how to cultivate the financial sector in an age in which FinTech has become so advanced, and fully addressing this issue means that we need to consider the variety of approaches to better financial regulation. We are now in an era in which financial supervision should focus on cultivating financial sector rather than on punishing irregularities, and our tactics as well as our organization structure should be changed accordingly. This is the background of our organization reform.

This will take some time, though; it should require about a year.