The ruling Liberal Democratic Party and the opposition camp reached a final agreement early Monday morning, putting an end to the prolonged dispute over financial stabilization bills.
In negotiations that continued until after midnight Sunday, the LDP agreed to the opposition’s compromise offer to give a proposed “financial resuscitation committee” — a new independent financial supervisory agency — limited authority in dictating policy for the banking sector. The two sides also agreed to quickly work out a scheme to deal with weak financial institutions, such as those with thinning capital bases.
Monday’s deal reached between the LDP and two opposition forces — the Democratic Party of Japan and the Heiwa-Kaikaku parliamentary group — effectively paves the way for the financial bills to clear the Diet during the current session, which is set to end Oct. 7.
Based on their agreement, the LDP and the opposition camp will jointly draw up revised financial bills and submit them to the Diet later this week.
In their latest deal, however, the two sides agreed to allow the committee and the ministry to jointly hold the authority to dictate policy in urgent situations such as impending bank failures. The Finance Ministry will retain its power to dictate banking policy under ordinary circumstances. The new laws are expected to be enacted in early October.
Speaking to reporters Monday morning, Prime Minister Keizo Obuchi acknowledged that he himself endorsed the outcome of the negotiations between the LDP and the opposition. He then called for quick passage of the bills to restore stability to the nation’s fragile financial system without further delay.
According to a series of agreements reached in the course of four-week negotiations and finalized Monday morning, the financial resuscitation committee is to be created under the Prime Minister’s Office.
The arrangement will remain valid until around the end of June, because the LDP and opposition had earlier agreed to submit and pass a separate bill for delegating many more of the Finance Ministry’s powers in the next ordinary Diet session, which is to start in January.
How much authority should be given to the committee was the last remaining point of contention after the LDP and the opposition cleared another major stumbling block Friday night by settling the dispute over the handling of the ailing Long-Term Credit Bank of Japan.
The government and the LDP had hoped to infuse public money into the LTCB, utilizing the 13 trillion yen fund set aside under the existing financial stabilization scheme. But Friday’s deal ruled out such a possibility.
However, both the LDP and opposition officials said there remains an option open for a potential LTCB buyer — presumably Sumitomo Trust & Banking Co. — to ask for the injection of public funds if the takeover results in a capital shortage.
At a news conference Monday morning, Chief Cabinet Secretary Hiromu Nonaka called for the opposition’s cooperation in legislating a new scheme to deal with weak banks by the end of the current Diet session.
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