FSA Newsletter October 2005

A:		I have been informed that the Working Group convened a meeting yesterday as just mentioned, and that the members engaged in lively discussions about the TOB system and other matters. Issues raised in the discussions on the TOB regulation include whether it is necessary to reexamine the regulation in view of maximizing corporate value and shareholders' interests, and whether it is necessary to further improve the transparency and fairness of securities transactions. In the process, due consideration must be given so that the smooth business restructuring of companies will not be undermined. In our opinion, the TOB regulation should be studied broadly from such viewpoints, and we hope the Working Group on TOB will deliberate the matter in a vigorous and speedy fashion. However, we cannot give a specific timeline for the future at this stage, as there are many issues that need to be studied.
(from the press conference following a cabinet meeting on Friday, July 29, 2005)

A:		I am indeed aware that those banks publicly announced that they have moved the date of their scheduled merger to January 1 of next year. My understanding is that, in proceeding with their scheduled merger, they decided to postpone it out of the consideration of the size and business volume of the new bank, so as to achieve a seamless merger by avoiding any form whatsoever of major system failure and any inconvenience to their customers caused by such a failure, from a viewpoint of moving on with full awareness of a PDCA cycle, including assurance of stability and safety through vigorous risk mitigation efforts, and making adequate preparations under appropriate project management. As regulatory authorities, we, in turn, are committed to conducting a review of their application for permission to merge, from a viewpoint of emphasis on customers and user protection; as to the prospect of whether the post-merger operation of the bank will be performed in a correct, fair and efficient fashion, we are intending to keep a careful watch.
(from the press conference following a cabinet meeting on Monday, August 15, 2005)

A:		While the IMF's evaluation of Japan's financial sector during the Article 4 consultations, which you just referred to in your question, sees approvingly the actions taken thus far by the Financial Services Agency, its ''Program for Financial Revival'' being a leading example, and the current conditions of the financial sector, it is also expecting that specific measures set in the ''Program for Further Financial Reform'' be implemented soon, citing the activation of the financial sector, including enhancement of profitability, as an action item for the future. I therefore believe that the IMF's view of Japan's financial sector has been improved significantly in consequence of further progress in dealing with non-performing loans, or the lifting of the freeze on ''pay off,'' and that the IMF now recognizes the Agency's actions in a positive light. In any event, through its continued efforts in implementing the measures set in the ''Program for Further Financial Reform,'' the Financial Services Agency aims to establish a financial system in which the level of user satisfaction of financial product and service is high, which is highly evaluated internationally, and is also capable of contributing to regional economies, by drawing on the private sector's vitality rather than the initiative of the government.
(from the press conference following a cabinet meeting on Wednesday, August 10, 2005)

''Over-the-counter insurance sales by banks'' means activities by banks and shinkin banks etc. (hereinafter referred to as ''banks etc.'') selling insurance products of insurance companies, by acting as life-insurance solicitors, non-life insurance agencies or insurance brokers.

(Note)

''Sales of insurance products'' as referred to here means agenting or brokering in the signing of an insurance agreement. Therefore, banks etc. are NOT parties to insurance agreements: each insurance agreement is made by and between the customer who buys the insurance product and the insurance company.

Over-the-counter insurance sales by banks were previously banned because of the concern that banks etc. might engage in such activities as exerting their dominance to force customers to buy insurance, in other words, what is called pressure-selling. From a perspective of, among other advantages, improved convenience for customers, however, the sale of some types of insurance products has been permitted since April 2001 on the condition that special measures should be taken to prevent adverse activities such as pressure-selling. Subsequently, in October 2002, the range of products that can be sold was expanded.

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Reference information)

Past Developments:
April 2001	The sales ban was lifted for credit life insurance linked to housing loans, long-term fire insurance, debt repayment support insurance and overseas travel accident insurance
October 2002	The sales ban was lifted for individual annuity insurance, zaikei (asset formation) insurance, maturity refund personal accident insurance with an annuity payout feature, and zaikei personal accident insurance

With the recent amendment to the Insurance Business Law Enforcement Regulations etc. (promulgated on July 8 of this year), the range of permissible products will be further expanded in December 2005, with the full lifting of the ban scheduled for approximately two years thereafter (December 2007), during which time the status of insurance solicitation by banks etc. will be monitored.

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Reference Information)
Insurance products of which sales will be permitted from December 2005:

-	Single premium permanent life insurance, and level premium endowment insurance (excluding corporate insurance contracts) and single premium endowment insurance with a period of insurance of up to ten years
-	Any individual non-life insurances, other than automobile insurance, (excluding business-related insurances) that are not under a contract of group insurance etc. or are maturity refund insurances
-	Maturity refund personal accident insurance

For banks etc. to engage in insurance solicitation, they are subject to special measures established to prevent adverse activities, including the prohibition against tie-in sales, intended for the avoidance of such adverse activities as pressure-selling, as described in Section 2 above.
With the full lifting of the ban in sight, the recent amendment to the Insurance Business Law Enforcement Regulations etc. includes new measures intended for the avoidance of adverse activities, including: (i) restriction on insurance solicitation in relation to borrowers etc. in need of business funding (prohibition against insurance solicitation for which commissions are paid), (ii) separation of personnel responsible for business funding loans and personnel responsible for insurance solicitation, and (iii) prohibition against insurance solicitation in relation to any one who applies for a loan. These measures will be checked for effectiveness by means of monitoring.