Provisional Translation

Q.

Regarding Suruga Bank, its internal investigation has found that Suruga Bank employees approved loans despite being aware that some of the documentation submitted with the applications had been falsified, and I would like to ask your thought to this finding.

A.

Do you mean so-called “share house” loans? I am aware that Suruga Bank publicized the details of the issues related to the “share house” financing which are the findings of the investigation conducted by its Crisis Management Committee. I understand that the problems pointed out therein will be scrutinized by a third-party committee of some sort established for this purpose. Suruga Bank itself is endeavoring to use these findings to identify the root causes, and it is important that the bank seek to make improvements. The Financial Services Agency (FSA) will respond in a proper manner once the facts of the case have been ascertained through our inspection currently underway.

Q.

Regarding this Suruga Bank case, I believe the FSA previously held up Suruga Bank as something of an exemplar in developing a new business model for regional banks but, given the current circumstances, it might be extremely difficult to create a new business model in a low interest rate environment. Could we please hear your views and feelings on this?

A.

Currently making a profit just from interest rate spreads is very difficult, so it’s a quite correct approach for reginal banks to strive to develop a new business model, given that they will find it rather difficult to survive in the face of a declining population and other factors unless they work to come up with a variety of new services. I think that under these circumstances, Suruga Bank’s financing related to share houses is the problem, however, its effort itself to survive is not the problem. Banks that do not make new efforts will find it tough going, and this by no means applies only to Suruga Bank.

Q.

On the matter of Suruga Bank, you stated that you would deal with the matter appropriately after the FSA’s inspection, but Suruga Bank’s own internal investigation has uncovered falsification of documents in the basic lending process, which has bearings on the fundamental character of the bank itself. Would it be correct to say that administrative action would inevitably be part of an appropriate response?

A.

To be honest, because the findings are not conclusive ones and the matter is still pending at the moment, I cannot say how things will turn out.