No bank too big to fail, Takenaka says

No bank is too big to fail, Financial Services Minister Heizo Takenaka told the U.S. magazine Newsweek in an interview published Monday on the Internet.

“Big banks have their merits,” Tanaka said when asked if the country’s big four banks are too big to fail. “They enjoy economies of scale. . . . But we do not hold the idea that they are too big to fail.

“That would jeopardize good corporate governance and create a moral hazard,” said Takenaka, who is also economics minister.

The big four banks are Mizuho Holdings Inc., UFJ Holdings Inc., Sumitomo Mitsui Banking Corp. and Mitsubishi Tokyo Financial Group Inc.

Asked how he would respond should chief executive officers at major banks resist efforts to clean up bad loans, Takenaka said the government has to provide an “incentive scheme” to change the system.

“We will continue discussions with bank CEOs about providing (reform) incentives,” he said.

Takenaka also called on the public to be patient until the results of financial reforms become apparent.

“It could be some time before we see results reflected in the economic indicators,” he said, “and in that sense we need to be patient.

“We in government have to show to the market a very resolute attitude to solve this problem. I expect markets to react positively.”