(provisional translation)
Basic Operating Policies for the Financial Reconstruction Commission (Summary) |
In order for the Japanese financial system to restore domestic and foreign confidence, thereby contributing to the revitalization of the economy, we cannot procrastinate coming to grips with the bad debt issue. Financial institutions will be required to abandon their tendency to follow each other and develop more distinctive business style. Similarly, regulators will also have to do away with "convoy-style" regulation in favor of clearly articulated rules and more transparent administration.
The Financial Reconstruction Commission advocates that the following measures be put in place quickly and intensively. The goal of these measures is aiming to ensure a substantial completion of disposition of the bad debt, at least at the largest banks, by the end of March 1999, and to rebuild the financial system into a strong, unshakably competitive system during the period ending March 2001.
(provisional translation)
Basic Operating Policies for the Financial Reconstruction Commission |
Financial Reconstruction Commission
January 20, 1999
Finance plays an important function in the economy by smoothly supplying the funds required for economic activities. For it to adequately fulfill this role, however, the financial system must be stable and enjoy the confidence of domestic and foreign participants. The facilitation of financial functions is therefore an indispensable prerequisite to the revitalization of the economy, which itself is one of the most pressing needs facing Japan.
Financial institutions sustained heavy damage during the collapse of the bubble economy and have been left with large amounts of non-performing debts. These debts have yet to be adequately disposed of, but institutions are already faced with even more severe economic conditions. This has been undermining domestic and foreign confidence in the financial system. We cannot procrastinate coming to grips with the bad debt issue any further. It must be dealt with as quickly as possible.
Meanwhile, international financial transactions are becoming more active and financial institutions are experiencing stiffer international competition. Japan must respond to these developments by moving forward with its financial system reform that will create dynamic financial markets on which free, market-based competition reigns. Accomplishing this will require financial institutions to abandon their tendency to follow each other and develop more distinctive business styles. Similarly, regulators will also have to do away with “convoy-style” regulation in favor of clearly articulated rules and more transparent administration.
The Financial Reconstruction Commission advocates that the following measures be put in
place quickly and intensively. The goal of these measures is aiming to ensure a
substantial completion of disposition of the bad debt, at least at the largest banks, by
the end of March 1999, and to rebuild the financial system into a strong, unshakably
competitive system during the period ending March 2001, i.e., during which the thorough
protection for depositors is legally committed to.
I. | Assurance of the soundness of the financial positions of financial institutions |
II. | Early strengthening of financial functions (capital injections) |
III. | Resolution of failed institutions |