FSA Newsletter November 2005

Program for Further Financial Reform

In the ''Program for Further Financial Reform(PDF),'' which was released to the public on December 24 of last year, ''establishment of financial institution management with an emphasis on user satisfaction'' is listed as one of the measures for setting in place a framework in which users can make transactions with understanding and satisfaction, in an attempt to create a vibrant financial system with a high degree of user satisfaction.
Japan's financial system is entering a new forward-looking phase aiming at establishing a desirable financial system for the future, having moved beyond the emergency reaction against the non-performing loans problem by implementing the ''Program for Further Financial Revival(PDF)'' and other measures. Given such a change of environments, financial institutions are also shifting from a phase of management faced with a significant challenge to improve the non-performing loans problem back to normal, to a new phase where they can exert more discretion in management, and are therefore each expected to develop and offer financial products and services catered to diversifying user needs.
Against this backdrop, the Financial Services Agency is driving forward a reform aimed at better quality, such as improved financial services formulated from a user perspective and enhanced competitive strengths. In implementing such a reform, we believe that what is critical for each financial institution is to try to actively comprehend diversifying user needs and gain trust from users by improving their management adequately in a fashion adapted to the user needs, or in other words: to deliver financial institution management formulated from a user perspective.

Survey on Actions Intended to Improve User Satisfaction

From March 31 to April 28, 2005, we conducted a survey on actions currently taken in the form of questionnaire-based customer satisfaction surveys and complaint and consultation services, whereby we requested each financial institution through respective business associations to conduct a survey and consequently received valid responses from a total of 1,322 institutions consisting of 744 deposit-taking institutions, 81 insurance companies, 453 securities companies etc. and 44 non-bank money lenders.
(Note: ''Securities companies etc.'' refers to securities companies and investment advisory companies; hereinafter the same)
The questionnaire-based user satisfaction survey rate was 38% in deposit-taking institutions, 69% in insurance companies, 9% in securities companies etc. and 34% in non-bank money lenders, all of which are approximate figures.

The following reasons, listed by operation category, were given as to why they do not conduct such a survey:

Deposit-taking institutions

- Comments box system etc. is used to receive complaints and consultation requests

- Complaints etc. are collected by customer liaison personnel
Insurance companies

- Call center system etc. is used to receive complaints etc.

- Most users are institutional investors such as reinsurance companies

Securities companies etc.

-	Complaints etc. are received directly from users during interpersonal sales activities
-	Customer base is small or consists mostly of institutional investors
-	Proprietary trading (Note: ''Proprietary trading'' means investments in stock, bonds and foreign exchange etc. that securities companies etc. conduct for their own account)

Non-bank money lenders

- Call center system etc. is used to receive complaints etc.

- Lending operation is concentrated on specific customers

Almost all respondents that conduct a questionnaire-based survey were found to utilize survey results in such actions as examination of improvement measures by specialized sections, and regular reports to the executive board for discussion of improvement measures. In the meantime, it is currently not a commonly established practice to release survey results or release a list of improvements based on survey results.

Many financial institutions were found to address complaints and consultation requests by establishing a dedicated section such as a customer support desk or call center; thus, many institutions take steps to reflect complaints and consultation requests received from users in their business administration.

Organization of ''Conference for Improved User Satisfaction''

In an attempt to implement our reform measure, and with a view to helping financial institutions comprehend a broad spectrum of user voices, we organized the ''Conference for Improved User Satisfaction'' from May to July 2005 with the participation of experts, users and business associations; the Conference was held separately for the respective operation categories (deposit-taking institutions, insurance companies, securities companies etc., and non-bank money lenders), each with two or three sessions.
While a variety of comments given during the Conference were based on the characteristics of the respective operation categories, the following ideas were presented almost across the board:

It is necessary for each financial institution to develop a structure in which to receive comments and complaints etc. from users in an organized fashion.
As to a structure in which to adequately comprehend user voices and reflect the findings in management improvements, each financial institution's voluntarism should be respected.
From a viewpoint of enhanced information supply to users, any such actions taken by each financial institution etc. should be actively released by the institution to the public.

For a summarization of the Conference by operation category, please refer to the attached (Point) Summary of ''Conference for Improved User Satisfaction.''

Request to Financial Institutions Regarding Actions for Improved User Satisfaction

On August 10, 2005, we requested financial institutions etc., through the respective business associations that they belong to, to take actions to comprehend comments and complaints etc. from users through a variety of approaches of their choice, including a questionnaire-based user satisfaction survey, and, based on the comments and complaints etc. thus received from users, to release to the public by the end of June 2006 a list of improvements in management that they work on during the FY2005. We intend to make a similar request for the FY2006 as well.
As this request was made with a view to encouraging each financial institution to take voluntary actions, we have no plan to take any particular administrative steps against financial institutions that take no requested actions, even if there are any such institutions. We nevertheless hope that each institution will actively work towards improved user satisfaction.

Conclusion

While there is presumably no need to explain the importance of comprehending user voices and delivering management reflecting them, some questioned during the Conference and other occasions whether ''such actions should belong to voluntary efforts of private financial institutions.'' The Financial Services Agency does respect such a view and voluntary efforts that are actually made by financial institutions, but we believe that for an attempt to create a desirable financial system for the future, it is desirable that each financial institution should work harder than ever in its voluntary, unique actions for improved user satisfaction and improve its operation as well as its financial product and service offerings, and should also release as much information as possible on what actions it has taken and thereby supply such information broadly to users.
Specifically, each financial institution is expected to improve its operation by addressing user voices and, by releasing to the public the details of such improvement, work on further enhancement of user protection. It is also hoped that each financial institution will improve its management through, for instance, the development of unique financial products and services by exploring user needs as part of its marketing activities, and will, according to its own corporate decision-making, release to the public as many details as possible of such efforts so that users can have convenient and easy-to-understand access to financial products and services that they want.
By, among other means, encouraging financial institutions to work harder on such actions, the Financial Services Agency is committed to setting in place an environment aimed at creating a financial system with a high degree of user satisfaction, an objective of the Program for Further Financial Reform.

(Point) Summary of ''Conference for Improved User Satisfaction''(PDF)

Minister for Financial Services Ito receives a written opinion from Mr. Kako, Chairman of the Business Accounting Council, at a council meeting. (October 28)		Minister for Financial Services Ito addresses the Local Financial Bureau Directors at a meeting. (October 26)
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