The Japan Federation of Economic Organizations (Keidanren) on Wednesday urged the government to establish a new financial safety net before rescinding full guarantees for bank deposits on April 1, 2001.
Deposits at financial institutions that go insolvent are currently fully protected by the government. With the restart of the so-called payoff system a year from April, however, the Deposit Insurance Corp will only guarantee up to 10 million yen per depositor at a collapsed bank.
Tetsuya Katada, a vice chairman of Keidanren, told a Tokyo press conference that the payoff system should be resumed as scheduled as long as a new safety net is put in place at the same time.
To pave the way for a new net, Katada, also chairman of Komatsu Ltd., said financial institutions should create a stable financial system by disposing bad loans and promoting mergers and alliances.
Katada also said authorities must be quicker to deal with ailing financial institutions.
He said this could be done by stepping in to restructure bank management and by introducing measures such as the so-called purchase-and-assumption system, under which healthy institutions are aided in early purchases of ailing banks.
Both measures have been practiced in the United States.
In addition, Katada said that the government should explain the payoff system to the public and work to stabilize the nation's economy.