August 2002
Financial Services Agency

Measures to promote mergers and other forms of consolidation of financial institutions
(Provisional Translation)

Objective of measures

In order to further strengthen the Japanese financial system and to enable the full operation of the financial intermediary function and the financial settlement function by financial institutions in the medium-to-long term, it is necessary to enhance the financial and managerial strength of financial institutions. A stronger financial base and management will enable financial institutions to extend financing smoothly.

In particular, mergers and other forms of consolidation of regional financial institutions are important tools to enhance the financial and managerial strength of financial institutions. However, there are several obstacles such as complex procedures which are expensive and time-consuming, and high expenses for mergers and other forms of consolidation.

Therefore, it is necessary to take measures to promote mergers and other forms of consolidation, in order to remove the obstacles faced by financial institutions choosing to reorganize themselves on their own initiatives, thereby facilitating mergers and other forms of consolidation.

Concrete Measures

The following measures are to be prepared, to revise the necessary legislation immediately, and to request the financial authorities that they make necessary arrangements with regard to the budget and taxation system.

   
- Developing a more simple environment with regard to procedures
  • Special measures with regard to transfers of fixed mortgage upon business transfer
  • Review of specific procedures with regard to Cooperative Financial Institutions
  • Exceptional treatment of notification to creditors
  • Introduction of a simple merger and consolidation scheme
  • Introduction of a system to enable the write-off of unsubscribed membership titles.
   
- Reduce the high costs of investment in computer systems and alleviate the tax burden on registration (revision of the tax system)
  • Reduce the registration tax on commercial and real-estate registration
  • Special depreciation scheme for new investment in computer systems
  • Expansion of the scope of eligible mergers and consolidation for approval of transfer by book value
  • Approval of transfer by book value of assets of financial institution upon participation in a holding company structure opting the consolidated tax payment system
   
- Recovery of the capital ratio temporarily reduced by mergers and other forms of consolidation(capital injection financed by government guarantee)
  • Capital injection using a new account opened in the Deposit Insurance Corporation and government guarantee to finance the operation
   
- Interim measures to increase the coverage limit of deposit insurance(10 million yen, the coverage limit for each depositor of the merged financial institution is to be raised for a certain period.)
   
- Other
  • Examine further support measures to integration of computer systems

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