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The nationalization of Nippon Credit Bank must have given foreign observers the impression that the “convoy system” era in financial policymaking is over, Finance Minister Kiichi Miyazawa said Tuesday.

Miyazawa was referring to the government decision Sunday to unilaterally place the ailing NCB under temporary state control, using a stricter inspection standard than before.

The convoy method, which the Finance Ministry has long taken to arbitrarily protect weak financial institutions, has been criticized from within and outside Japan.

During a regular news conference, Miyazawa said the Financial Supervisory Agency was recently launched based on the government’s soul-searching of its inadequate inspection and administration. The FSA has determined that the bank was insolvent, and the decision must be right, he added.

He showed some understanding toward the bank’s discontent with the decision because the old supervisory body, the Finance Ministry, had approved what the bank was doing. But that cannot be an excuse for the bank because the system has been changed, Miyazawa added.

The FSA took over the supervisory function of the ministry in June.

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