FSA Newsletter June 2006

The Working Group on Information Technology Innovations and Financial System (hereinafter referred to as the "Working Group", Chairman: Professor Shuya Nomura, Chuo Law School) under the Sectional Committee on Financial System of the Financial System Council has conducted a fact-finding survey on new prepaid-type electronic payment services exemplified by so-called electronic money based on interviews with service providers and summarized the issues on seven occasions in total since October 2005, as part of its studies aimed at compiling legislation to enable users to actively enjoy the benefits of innovations in information technology (IT) and to improve the convenience, etc. of the financial infrastructure based on the Program for Further Financial Reform announced in December 2004.
A summary of the discussions which took place in the Working Group was released to the public in the form of the Chairman's memo entitled "Issues facing the Development of New Electronic Payment Services" on April 26.
In consideration of the Working Group's discussions so far, the Memorandum of Chairman is primarily a summary of: (1) matters to be considered by service providers; and (2) issues to be studied by the government in the future.
This article provides an overview of the Chairman's memo.

I. Overview of Issues facing the Development of New Electronic Payment Services (Memorandum of Chairman)

1. Description of Recent Electronic Payment Services

Electronic payment services are wide-ranging. The Working Group interviewed providers of prepaid-type electronic payment services which are becoming increasingly widespread nowadays. The Memorandum of Chairman summarizes and categorizes the services into "electronic payment services using IC chips" and "electronic payment services over the Internet", based on the interview results.
Among the two, "electronic payment services using IC chips" continue to expand rapidly in line with the sophistication of traffic cards and IC cards per se and affiliations with convenience stores, mileage programs, point-based rewards programs, etc. As of March 2006, the number of issued IC cards, etc. exceeded 28 million. Moreover, services have been diversifying recently, as exemplified by the provision of services using not only IC cards but also IC-chip-embedded mobile phones and the launch of services which enable electronic value to be transferred between users.
"Electronic payment services over the Internet" are characterized by the administration of electronic value with respect to each user solely on the service provider's server, without issuing cards, etc. which carry electronic value.

2.
Matters Deemed to Require Consideration by Electronic Payment Service Providers

A wide range of electronic payment services are expected to be developed and disseminated in the future, but there is currently no legislation, etc. which regulates such electronic payment services across the board. For this reason, the Working Group has indicated that the following five matters should at least be considered by providers of electronic payment services, in order to improve the reliability of services by ensuring the protection of users and stability in settlement.

(1) Clarification of contractual relationships, etc.

- Service providers should clearly state, for example, the point in time at which the user's obligation to make a payment disappears, the responsibilities of the user and the service provider and other such matters in an easy-to-understand manner for users in the terms and conditions of use.

(2) Handling of loss, impairment, etc. of electronic value data

- Service providers should clearly state how electronic value data on IC chips and servers will be handled in the event that it is lost, impaired, etc. in the terms and conditions of use, etc., especially the conditions of re-issuance, etc.

(3) Information security and ensuring reliability of system operation

- In particular, services in which electronic value data is centrally managed solely on the service provider's server are deemed to be exposed to higher risks of hacking, unauthorized use and other illicit acts. Therefore, countermeasures should be taken, such as devising an authorization mechanism.

(4) Proper management of advances received

- In the case of electronic payment services which involve receiving a certain amount of money from users in advance, a service provider should have a mechanism to refund as much money as possible even if it goes bankrupt.

(5) Protection of personal information

- While this is not limited to electronic payment services, due caution needs to be exercised especially when using the usage log in other operations, etc. in order to protect personal information.

3.
Issues Relating to Electronic Payment Services to be Studied in the Future

In the Working Group's discussions, members have pointed out that the dissemination of electronic payment services has the potential to affect the future profile of Japan's financial settlement system and that problems are arising with which are difficult to be dealt legally within the existing legislative framework in providing diverse services according to users' needs. With this in mind, it is deemed necessary to properly develop an environment in which users can receive highly convenient services from private service providers with a sense of security, and private service providers can evolve diverse services according to user needs based on their creativity.
From this perspective, it is deemed necessary for the government to continue conducting studies especially on how to deal with the following three issues in the future, by taking trends in other countries into account, while making sure the development of services in line with IT innovations will not be hindered, in light of the future trends in electronic payment services, etc.

(1) User protection in the event that the service provider goes bankrup

- Currently, the Law for Prepaid Cards does not apply to services in which electronic value data is managed solely on the service provider's server. It is deemed necessary to work out an appropriate user protection method to deal with cases in which such a service provider goes bankrupt.

(2) How responsibility should be shared between parties to electronic payment services, etc.

- It is deemed necessary to look into how responsibility should be shared between the service provider and the user, etc. in cases where some kind of problem arises in the electronic payment services (e.g., cases where electronic value data is lost or impaired or the settlement is not completed or delayed due to system failure, etc.) in order to protect users and ensure confidence in electronic payment services.

(3) Modality of electronic payment services

- In light of user convenience, some members pointed out during the Working Group's discussions that user convenience would improve if services that transfer electronic value between users and services that convert electronic value into cash are provided.
- On the other hand, it is necessary to clearly define the relationship between these services with the existing legislative framework and business practices regarding "exchange transactions" under the Banking Law and "deposits" under the Law Concerning the Regulation of Receiving of Capital Subscription, Deposits and Interest on Deposits. In relation to this, for example, some members said that sufficient user protection should be sought when looking into the modality of regulations, etc., and that if the electronic value is small and the services are provided to the extent that they are deemed unlikely to seriously affect the stability of the financial settlement system, one way is to establish certain rules for handling them with other settlement services.
- Accordingly, the Working Group expects the government to continue actively conducting studies in the future on the ideal form of electronic payment services to enable the provision of diverse and stable settlement services and properly protect users in consideration of the above.

II. Future Actions

The Financial Services Agency (FSA) expects service providers to continue making efforts in providing services in consideration of user protection, etc., by heeding the matters pointed out in the Memorandum of Chairman. Furthermore, the FSA will continue examining the matters pointed out in the Memorandum of Chairman as issues that need to be studied by the government in the future, in order to enable diverse and stable settlement services and to properly protect users, while making sure that the development of services in line with IT innovations will not be hindered.

The 5^th meeting of the Subcommittee on Certified Public Accountants System of the Financial System Council was held on Wednesday April 26.
The Subcommittee had engaged in deliberations and made recommendations to improve the certified public accountants (CPAs) system throughout fiscal 2001 and 2002, which led to the revision of the Certified Public Accountant Law in 2003. After an extended recess, the Subcommittee decided to resume deliberations in consideration of the circumstances subsequently faced by the system of CPAs and auditing firms.
Audits conducted by CPAs and auditing firms constitute an extremely important system for ensuring the reliability of financial statements, and their enhancement and reinforcement are pressing challenges. Under these circumstances, the Subcommittee plans to conduct comprehensive studies on how auditing firms, etc. should operate.
As the issues regarding how auditing firms, etc. should operate are deemed to be wide-ranging, the Subcommittee intends to narrow down the specific issues in the course of having discussions with members from a broad perspective in the months ahead.
At the 5th meeting, the Executive Bureau first explained the circumstances faced by the system of auditing firms, etc. This was followed by a free discussion, in which members expressed their opinions from a broad perspective.
In the next meeting, the Subcommittee plans to summarize the system of auditing firms, etc. in other countries and hold discussions based on the summary.

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Results on "Small- and Medium-Sized Enterprise Financing Monitoring" Conducted in February 2006

"Small- and Medium-Sized Enterprise (SME) Financing Monitoring" is performed on a quarterly basis by employees of the Local Finance Bureaus and Offices with the cooperation of the Japan Chamber of Commerce and Industry (JCCI), etc. for the purpose of accurately identifying the actual status, etc. of SME financing from the viewpoint of SMEs in the respective regions, as part of efforts to facilitate SME financing.
The Financial Services Agency (FSA) recently summarized and published the following results of SME Financing Monitoring conducted in February 2006.
An overview of the latest survey results reveals that:
(1) While lending trends in SME financing over the most recent three months varied from region to region, the majority of interviewees answered "Turned positive" or "Turned somewhat more positive" in nine out of eleven regions. Those who responded "Turned negative" or "Turned somewhat more negative" accounted for less than 20% in all regions.
(2) Judging from the comments on the actual status of SME financing, a positive trend seems to be spreading steadily among financial institutions in general, exemplified by financing without excessive reliance on collateral and guarantees, as negative comments (e.g., "stance to lending varies with the borrower's financial position") received were limited in number.
The FSA will continue to make efforts in facilitating SME financing, including actively identifying the local sentiment towards SME financing through Monitoring and making use of the findings as important information when inspecting and supervising financial institutions.

1. 1. Subjects of Monitoring
We conducted interviews with a total of 397 individuals (from 206 organizations) in 47 prefectures nationwide who are involved in management consulting in such organizations as JCCI, Central Federation of Societies of Commerce and Industry, Societies of Commerce and Industry, National Federation of Small Business Associations, Federations of Chambers of Commerce and Industry and Small and Medium Entrepreneurs Associations.

Organization	Number of Interviewees (Number of Organizations)
JCCI	198 (86)
Societies of Commerce and Industry	97 (79)
Central Federation of Societies of Commerce and Industry	61 (21)
National Federation of Small Business Associations	31 (14)
Federation of Chamber Commerce and Industry	5 (3)
Small and Medium Entrepreneurs Associations	5 (3)
Total	397 (206)

(Note)

As SME Financing Monitoring is not a fixed-point survey in which the survey is conducted with the same interviewees every time, the number and identity of interviewees may vary between surveys.

2. Overview of Interview Results
(1) Overview of interview results: "Lending trends in SME financing over the most recent three months"

[By Region]

While the results varied between regions, the majority of interviewees answered "Turned positive" or "Turned somewhat more positive" in the Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Kyushu and Okinawa regions. Those who responded "Turned negative" or "Turned somewhat more negative" accounted for less than 20% in all regions.

[By Type of Financial Institution]

Trend over Most Recent 3 Months	Major Banks		Regional Banks, Second-tier Regional Banks		Shinkin Banks, Credit Unions		Government-affiliated Financial Institutions		Total
1. Turned positive	56	25.7%	67	18.0%	86	24.0%	137	35.7%	346	26.0%
2. Turned somewhat more positive	85	39.0%	159	42.6%	151	42.2%	120	31.3%	515	38.6%
3. Unchanged	61	28.0%	119	31.9%	101	28.2%	93	24.2%	374	28.1%
4. Turned somewhat more negative	12	5.5%	25	6.7%	12	3.4%	30	7.8%	79	5.9%
5. Turned negative	4	1.8%	5	0.8%	8	2.2%	4	1.0%	19	1.4%
Total	218	100.0%	373	100.0%	358	100.0%	384	100.0%	1333	100.0%

(Note 1)		SME Financing Monitoring is not a fixed-point survey in which the survey is conducted with the same interviewees every time.
(Note 2)		The table above shows the breakdown of valid responses and does NOT include non-responses and unclear responses. For this reason, the number of interviewees is not consistent with the total number of responses.

- Reasons given by respondents who selected "4. Turned somewhat more negative" or "5. Turned negative" in the table above

Reasons given for Answer 4 or 5 above	Major Banks		Regional Banks, Second-tier Regional Banks		Shinkin Banks, Credit Unions		Government- affiliated Financial Institutions		Total
Refusal of new loan requests	1	4.8%	7	17.9%	8	30.8%	8	19.5%	24	18.9%
Collateral & guarantee	3	14.3%	14	35.9%	8	30.8%	5	12.2%	30	23.6%
Interest rates	1	4.8%	3	7.7%	2	7.7%	1	2.4%	7	5.5%
Lending terms	5	23.8%	9	23.1%	5	19.2%	14	34.1%	33	26.0%
Loan assessment procedures	5	23.8%	5	12.8%	3	11.5%	10	24.4%	23	18.1%
Other	6	28.6%	1	2.6%	0	0.0%	3	7.3%	10	7.9%
Total	21	100.0%	39	100.0%	26	100.0%	41	100.0%	127	100.0%

(Note)

As a single interviewee may give multiple answers, the total number of answers 4 and 5 above (98) is not consistent with the total number of the responses in the table above (127).

(2) Overview of interview results: "Actual status, etc. of SME financing in the respective regions from the viewpoint of SMEs"

> Interviews were conducted on the following eight topics regarding the actual status, etc. of SME financing in the respective regions from the viewpoint of SMEs:

(a) Stance to lending
(b) Collateral and guarantee
(c) Management guidance and business startup or revival assistance
(d) System of providing explanation when lending
(e) Quality and ability of financial institutions
(f) Period of loan assessment
(g) Interest rates
(h) Others

> Main comments received with respect to each topic are as follows:

(a) Comments on actual status of stance to lending

-		There have been no reports on credit crunch and oppressive debt collection. Financial institutions are generally inclined to actively tap new borrowers. (Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku, Kyushu, Fukuoka and Okinawa)
-		Staff of financial institutions come to places of business for solicitation and respond promptly to changes in lending terms. (Hokkaido, Kanto, Tokai, Hokuriku, Kinki, Kyushu, Fukuoka and Okinawa)
-		Can acknowledge the branch manager's positive stance from regular visits to the Chamber of Commerce and Industry, etc. to collect information on regional affairs and request mediation for financing, etc. (Hokkaido, Kanto, Tokai, Hokuriku, Kinki, Kyushu, Fukuoka and Okinawa)
-		Financial institutions' stance to lending varies and is becoming polarized due to their cherry-picking of borrowing companies. (Hokkaido, Kanto, Kinki, Shikoku, Kyushu, Fukuoka and Okinawa)

(b) Comments on actual status of collateral and guarantee

-		It is becoming easier to borrow partly due to the commercialization of affiliated loans targeted at JCCI members, etc. which do not require any collateral/third-party guarantee. (Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku, Fukuoka and Okinawa)
-		Financial institutions are providing loans without relying on collateral and guarantees after properly assessing the business performance of the company itself. (Hokkaido, Tohoku, Kanto, Kinki, Chugoku, Kyushu and Fukuoka)
-		Additional collateral is no longer requested upon refinancing. (Hokkaido, Tohoku, Tokai, Kinki and Shikoku)
-		The valuation of collateral is reasonable and financial institutions are lending actively. (Tohoku, Kanto, Hokuriku and Shikoku)
-		Financial institutions do not rely on collateral and guarantees as excessively as they used to. (Hokkaido, Tohoku, Tokai, Kinki, Chugoku, Shikoku, Kyushu and Fukuoka)
-		Financial institutions might be focusing on collateral and guarantees because considerable skill is required for non-collateral valuations. (Tokai and Kyushu)
-		Financial institutions' stance to lending still appears to be dependent on collateral and guarantees. (Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku, Kyushu, Fukuoka and Okinawa)
-		Financial institutions are shifting their focus from physical collateral to human resources collateral. (Tohoku, Kyushu and Fukuoka.)

(c) Comments on actual status of management guidance and business startup or revival assistance

-		Financial institutions are making efforts aggressively at the organization level, such as establishing management consulting divisions. (Hokkaido, Tohoku, Kanto, Tokai, Kinki, Chugoku and Fukuoka)
-		Financial institutions are appointing experts and making efforts in human resources development. (Hokkaido, Tohoku, Kanto, Tokai, Chugoku and Fukuoka)
-		Financial institutions are preparing aggressive revival plans by digging deep into management affairs. (Hokkaido, Tohoku, Kanto, Tokai, Kinki, Chugoku, Kyushu and Fukuoka)
-		Financial institutions are actively providing consulting and business-matching services while training SME management consultants. (Kanto, Tokai, Hokuriku, Kinki and Okinawa)
-		Financial institutions are making aggressive efforts in holding management seminars, collaborating with SME Revitalization Support Councils and investing in funds. (Hokkaido, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku, Kyushu and Okinawa)
-		Financial institutions are making progress in joint industry-academic-government initiatives. (Hokkaido, Kanto, Hokuriku and Shikoku)
-		Financial institutions do not have the structure to venture into management guidance and business startup/revival assistance. (Hokkaido, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku, Kyushu, Fukuoka and Okinawa)
-		Financial institutions are not actively engaged in management guidance and business startup/revival assistance. (Hokkaido, Tohoku, Kinki, Chugoku, Shikoku and Kyushu)

(d) Comments on system of providing explanation when lending

-		The explanations provided by financial institutions seem sufficient, as there are opportunities for the company, financial institution, and the Society of Commerce and Industry, etc. to have tripartite meetings. (Hokkaido, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Fukuoka and Okinawa)
-		Financial institutions are providing sufficient explanation upon financing with respect to the purpose of funds, cash flows, cash planning, borrowing limit, etc. (Hokkaido, Kanto, Tokai, Hokuriku, Kinki, Kyushu, Fukuoka and Okinawa)
-		Financial institutions appear to be improving their system of providing an explanation at the organization level. (Hokkaido, Tohoku, Kanto, Hokuriku, Kinki, Chugoku, Shikoku and Fukuoka)
-		Financial institutions are making sure that a careful explanation is provided even in cases where a request for a loan is rejected. (Hokkaido, Tohoku, Kanto, Hokuriku, Chugoku, Shikoku and Kyushu)
-		Explanation of risks and matters that are disadvantageous to financial institutions is insufficient. (Hokkaido, Tohoku, Kyushu and Fukuoka)
-		Financial institutions lack the ability to provide an explanation, including the staff's lack of knowledge. (Kanto, Kinki, Chugoku, Fukuoka and Okinawa)
-		Explanation is insufficient in cases where a loan request is rejected. (Hokkaido, Tohoku, Kinki, Chugoku, Shikoku and Kyushu)

(e) Comments on actual status of quality and ability of financial institutions

-		Financial institutions are making aggressive efforts at the organization level, including encouraging staff to acquire qualifications. (Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Shikoku, Kyushu and Fukuoka)
-		Financial institutions are actively conducting training to improve their discerning eyes, and are gaining the ability to determine the future potential of companies. (Hokkaido, Tohoku, Kanto, Hokuriku, Chugoku, Kyushu and Fukuoka)
-		The qualities and abilities of financial institutions are sufficient in terms of analysis of financial statements, analysis of cash flows, etc. (Hokkaido, Kanto, Tokai, Hokuriku, Kinki, Kyushu and Fukuoka)
-		Financial institutions are not making enough efforts to improve the qualities and abilities of staff at the organization level. (Hokkaido, Kanto, Hokuriku, Kinki, Chugoku, Shikoku, Kyushu and Fukuoka)
-		Financial institutions are attaching importance to past performance, while ignoring the qualities of the top management and the future potential of companies. (Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku, Kyushu, Fukuoka and Okinawa)

(f) Comments on period of loan assessment

-		The assessment period is becoming shorter. (Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku, Kyushu, Fukuoka and Okinawa)
-		Financial instruments with shorter assessment periods are being developed, as exemplified by "speedy loans". (Hokkaido, Tohoku, Kanto, Tokai, Kinki, Shikoku, Kyushu and Fukuoka)
-		The assessment process is becoming simpler—for example, less documentation is required for application. (Kanto, Hokuriku, Kinki and Shikoku)
-		The assessment period is still long for some loans. (Hokkaido, Tohoku, Kanto, Kinki, Chugoku, Fukuoka and Okinawa)
-		The assessment period is becoming shorter (some as short as two to three business days) based on the utilization of SME credit risk database (CRD), unique scoring sheets, etc. However, the assessment period is long (approx. one month) for some publicly-backed loans. (Kanto, Kinki and Chugoku)

(g) Comments on actual status of interest rates

-		There have been no particular complaints about interest rates. (Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku, Kyushu, Fukuoka and Okinawa)
-		Interest rates are on the decline. In some cases, financial institutions offer lower interest rates due to competition with other banks. (Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku and Okinawa)
-		Interest rates are being set properly according to the credit risks. (Hokkaido, Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Shikoku and Kyushu)
-		There have been no reports lately about financial institutions demanding that interest rates be raised one-sidedly. (Shikoku)
-		While financial institutions have the right to decide interest rates, negotiations with the loan applicant are inadequate in some cases. (Kanto and Kinki)
-		In some cases, high interest rates are offered even to applicants with a good financial position unless they negotiate with financial institutions. (Tohoku, Kanto, Tokai, Hokuriku, Kinki, Chugoku, Kyushu, Fukuoka, Okinawa)

(h) Other Comments

-		JCCI and other commerce/industry-related groups should be provided with information on all monetary policies, not just on SME financing. (Tohoku)
-		While it goes without saying that financial institutions should be supervised properly, "debt" still tends to be considered a taboo in Japan, resulting in the lack of proper education both at home and at school. Deregulation seems to have taken precedence in that users appear to be at the mercy of service providers due to having virtually no knowledge. For this reason, users should be educated properly on matters that they should at least be aware of. (Kanto)
-		In some cases, companies apply for loans without making business efforts, as a wide range of publicly-backed loans are available. In a way, it hinders the growth of young entrepreneurs. (Hokuriku)
-		There are cases in which the loan applicant agrees to everything the financial institution says in negotiations over the discount rate of bills and the lending rate. Part of the problem is the lack of learning efforts on the borrower's side. (Kinki)
-		A system that enables businesses to revive even after failing once (bankruptcy, etc.) should be established. Direct financing should also be realized in rural districts. Otherwise, it would be difficult to start new businesses and revive existing businesses. (Kyushu)

(3) Overview of interview results: "Case examples showing the penetration of measures for facilitating SME financing"

-		In SME Financing Monitoring, a specific theme relating to inspection and supervision is set each time, and a survey is conducted accordingly with respect to cases showing the penetration of measures for facilitating SME financing.
-		The theme for the latest Monitoring was as follows.

Degree of SMEs' awareness of the Supplementary Issue to the Financial Inspection

[Main Comments Received]

-		Although the Supplementary Issue to the Financial Inspection Manual seems to have penetrated enough related institutions, it does not appear to have penetrated borrowers (SMEs).
-		Now that financial institutions' lending stance is positive, the Supplementary Issue might not be as necessary as before.
-		Public sentiment has improved since the production of the Supplementary Issue. The Supplementary Issue is hardly discussed nowadays.
-		Why not utilize PR campaigns using the Internet, TV commercials and other media?

3. How the "SME Financing Monitoring" Results Are Utilized

(1)		Interviews
		We conducted interviews with individual financial institutions in regards to their action policies, systems, etc. by making effective use of the information on those financial institutions obtained from SME Financing Monitoring.
(2)		Requests at Discussion Meetings (Utilized by FSA)
		We present cases acquired from SME Financing Monitoring at monthly discussion meetings held between top officials of the FSA and representatives of business associations and on other occasions. More specifically, we request participants to: further facilitate the supply of funds to sound SMEs, including loans focusing on cash flows from business activities without excessively relying on collateral and guarantees; provide a sufficient explanation that could gain customers' understanding and convince them, in consideration of the past business relationship and the customers' knowledge, experience and asset positions; make the Supplementary Issue to the Financial Inspection Manual common knowledge; and so on.
(3)		Utilization at Conference for Regional Financing Facilitation (Utilized by Local Finance Bureaus, etc.)
		On various occasions including the semiannual Conference for Regional Financing Facilitation in each prefecture (consisting of financial authorities, small- and medium-sized and regional financial institutions and relevant business associations) and meetings between top officials of Local Finance Bureaus and representatives of financial institutions, we urge participants to develop a system to provide an explanation to customers and enhance consultation and complaint-handling functions, and request them to make efforts to facilitate SME financing.

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Consultation Requests Received by Counseling Office for Financial Services Users

1. Background

On July 19, 2005, the Financial Services Agency (FSA) launched consultation services with the opening of the Counseling Office for Financial Services Users (hereinafter referred to as "Counseling Office") assigned to serve as a one-stop center to handle users' inquiries, consultation requests, opinions, etc. on financial services, etc. (hereinafter referred to as "consultation requests, etc."), with the aim of improving the user convenience of financial services and putting the received information to effective use in financial administration.
The number of consultation requests received by the Counseling Office from users, the gist of major consultation cases and other such information are released to the public on a quarterly basis. The consultation requests, etc. received, their characteristics and other related information for the quarter commencing January 1, 2006 and ending March 31, 2006 are as follows.

2. Outline of Public Release

(1) We received a total of 9,668 consultation requests, etc. between January 1, 2006 and March 31, 2006. The average number of consultation requests, etc. received per day was 158, more or less the same as the level in the previous period from October 1, 2005 to December 31, 2005 (159 requests).
(2) By subject, the number of consultation requests, etc. related to depositing, financing, etc. totaled 2,444 (25%), insurance products, etc. totaled 2,593 (27%), investment products, etc. totaled 3,649 (38%), cash loans, etc. totaled 837 (9%) and financial administration in general and other issues totaled 145 (1%).
(3) The following characteristics, etc. were identified with respect to each subject area.

	a.	Depositing, financing, etc.: With respect to financing services, we received consultation requests concerning the execution and repayment of loans, etc. With respect to depositing services, we received consultation requests relating to the deposit-making structure, such as personal identification procedures.
	b.	Insurance products, etc: We received consultation requests, etc. concerning insurance payments, insurance companies' responses to insurance claims, etc.
	c.	Investment products, etc.: We received consultation requests, etc. relating to unlisted shares, securities companies, foreign exchange margin trading businesses, stock exchanges, how to use Electronic Disclosure for Investors' NETwork (EDINET), etc.
	d.	Cash loans, etc.: We received consultation requests, etc. relating to inquiries about the existence of moneylender registration, individual transactions, contract results, etc.

(4) Consultation requests, etc. received by the Counseling Office included information that would be useful for inspection and supervision purposes. For the purpose of protecting users in general and improving user convenience, we make use of such valuable information in financial administration, when conducting verification as part of an inspection, conducting interviews for supervision, issuing reporting orders and taking administrative action with respect to the financial institution concerned:

	a.	Information on credit crunch and oppressive debt collection;
	b.	Information on the sale of financial products to a borrower by a financial institution exploiting its dominant position;
	c.	Information on improper conduct by salespersons, etc. of an insurance company (such as abetting non-disclosure, paying insurance premiums on behalf of the policyholder, producing a contract without authorization and borrowing someone else's name); and
	d.	Information on improper conduct by foreign exchange margin trading businesses (such as making unsolicited calls to general customers, making assertive judgments, trading without authorization, and delaying refund of balance, etc.).

Compared to the previous quarter (from October 1, 2005 to December 31, 2005), the number of consultation requests relating to unlisted shares substantially increased from 447 to 985.

3. Approach to Future Actions

The Counseling Office was established as part of measures designed to enhance the framework for providing information and dealing with consultation requests, etc. in order to protect users under the Program for Further Financial Reform. The FSA will continue to run the Counseling Office in an appropriate fashion, including summarizing and publishing the number of consultation requests, etc. received and the gist of major consultation cases on a quarterly basis, in order to realize the ideal financial system pursued under the Program for Further Financial Reform, that is, a financial system with high user satisfaction.

Yoshitaka Sakurada (Senior Vice Minister for Financial Services) meets with Christian Noyer, (Governor of the Banque de France) on May 22nd.		FSA launched a for kids website on May 11th. (available in Japanese only)
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