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2008年12月30日 (火)

公的資金注入 融資力回復のため積極活用を

The Yomiuri Shimbun (Dec. 30, 2008)

Use govt safety net to keep credit flowing

公的資金注入 融資力回復のため積極活用を(1230日付・読売社説)

There is a growing concern that regional financial institutions will make little use of a system to inject public funds into them after the revised Financial Function Strengthening Law came into effect this month.


In Japan's financial circles, there is a strong sentiment that smaller regional institutions can lend sufficiently without the injection of public funds. This may stem from fear of intervention by the Financial Services Agency after the injection of public funds and the management of such institutions being held responsible by the FSA for any problems.


The financial picture in provincial areas should not be thrown into disarray by the defensiveness of the management of regional lenders. Financial crisis should be avoided by effectively using the safety net.


The original provisions of the Financial Function Strengthening Law that enabled the central government to inject public funds into small and midsize financial institutions as a preventive measure to bolster capital strength, expired in March. But with the enactment of the revised law, the system for providing public funds to banks has been revived temporarily, and will be in effect until March 2012. The limit on the amount of money that can be given to financial institutions was raised from 2 trillion yen to 12 trillion yen, an amount almost equal to that injected into financial institutions in the past, including the bailout of the major banks after the burst of the bubble economy.



Cutting off the credit flow

Firms in rural areas and small and midsize companies complain the financial faucet suddenly has been turned off. Many bankruptcies have resulted from the financing provided by regional institutions drying up.


According to half-year earning reports ending in September, about one-third of regional banks were in the red. The economic downturn has been accelerating further in the latter half of the fiscal year. Doubtless their equity capital decreased due to an increase in nonperforming loans and losses caused by falling stock prices, and as a result, they have further lost their reserve power for financing.


Although small and midsize financial institutions have an increased need for capital reinforcement, it is currently difficult for them to raise capital by themselves. It is under precisely such circumstances that public funds have a role to play.


However, no financial institutions have yet applied for public funds. Even under the expired Financial Function Strengthening Law that limited such use of public funds to 2 trillion yen, there were only two applications totaling 40 billion yen.


In the draft of the revised law, the clarification of the management's responsibility was excluded to try to promote the use of the system, but later, the content of the draft was changed to allow authorities to hold management responsible for mistakes.



Errors have consequences

Some claim that such a provision in the law discourages institutions from seeking help. But the program is not intended to rescue failed financial institutions, such as Shinginko Tokyo, a bank primarily owned by the Tokyo metropolitan government.


Financial institutions indispensable to an area's economy are responsible for supporting the local economy by providing credit. If their financial wherewithal becomes insufficient to fulfill this responsibility, they should seek public funds without hesitation to enable them to recover their power for financing.


There are many financial institutions that deny there is a credit crunch, saying that they are making necessary loans. If so, they should voluntarily make public how they contribute to the local economy, including their provision of finances to small and midsize companies and future plans to make such loans.


With the revision of the law, even in the case of a merger that integrates a financial institution in a bad shape with another financial institution, the resulting entity can avoid lowering its capital adequacy ratio with the injection of public funds.


We hope that the revised law will add momentum to the reorganization of the financial community in a bid to drastically reinforce sound management.


(From The Yomiuri Shimbun, Dec. 30, 2008)

200812300133  読売新聞)


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