Prime Minister Ryutaro Hashimoto said Tuesday that the government's proposal to use public funds to inject fresh capital into banks would not run counter to its "Big Bang" reform efforts nor signal a return to the "convoy system" of financial sector protection.Speaking before a plenary session of the House of Representatives, Hashimoto stressed the importance of restoring confidence in the creditworthiness of the domestic financial system to revive the general economy.At the same time, the prime minister pointed to the need for financial institutions to make further efforts to restructure their operations because public money is to be used to stabilize the banking system."I would like to see the banks bear in mind their social responsibility and take further steps toward rationalization," Hashimoto said, adding that progress with such streamlining efforts should be publicly disclosed. He also said the salaries of senior officials at financial firms -- which are in many cases much higher than in other industries -- should be cut back to levels more acceptable to the public.Tuesday marked the formal start of Diet deliberations on controversial bills designed to allow the Deposit Insurance Corp. to receive 10 trillion yen worth of government bonds, and government guarantees on up to 20 trillion yen of its borrowings from the Bank of Japan and other similar institutions to aid its effort to support the financial sector.Of the 30 trillion yen total, 17 trillion yen -- 7 trillion yen worth of bonds plus 10 trillion yen in guarantees -- would be used to carry out the government's pledge to fully protect deposits up to March 2001.The remaining 13 trillion yen would be used to help boost banks' capital in the form of purchases of preferred stock or subordinated bonds -- a procedure critics say would be tantamount to bailing out bad banks, and one that may lead to lax management.
