All of the nation’s financial institutions are in good health following the introduction of the “payoff” system cap on time-deposit guarantees at banks, Financial Services Minister Hakuo Yanagisawa said Monday.
Starting Monday, the government only guarantees 10 million yen worth of every time deposit endangered by a bank failure. The government is set to impose the same refund limit on ordinary and checking-account deposits a year from now.
The plan to end the blanket guarantees has raised concern that depositors will make a run on the banks, forcing weaker institutions to collapse.
Yanagisawa brushed aside such worries.
“I believe that banks are in a safe condition,” he said at a news conference, stressing that financial regulators will keep a close eye on them.
Yanagisawa stressed that depositors bear a responsibility to keep tabs on their banks’ financial conditions, now that the government’s blanket deposit protection guarantee has been lifted.
Bank executives also bear a responsibility to improve their institutions’ operations, especially by bolstering profits, to win the trust of depositors, Yanagisawa said.
Regarding yet another injection of public funds into banks, Yanagisawa reiterated that there is no need for more injections of taxpayer money, although the government will take steps if needed in the event of a financial meltdown.
Some experts and policymakers question the soundness of banks’ capital bases as they try to dispose of their massive problem loans. Banks that operate internationally are required to have a capital adequacy ratio of 8 percent or more.
These problems have led many, including Bank of Japan Gov. Masaru Hayami, to call for a fresh injection of public funds into banks.
BOJ statistics show that as of Dec. 31, the nation’s 163 banks had a total deposit base of 490 trillion yen, half of which — about 244 trillion yen — consisted of deposits of more than 10 million yen per account.
Deposits of more than 10 million yen per account break down into 127 trillion yen in time deposits, 62 trillion yen in ordinary deposits and 55 trillion yen in other types of savings.
For more than a year, jittery individual and corporate depositors, as well as local governments, have taken a range of measures to protect themselves from any adverse impact the abolition of the full guarantee might have on their savings.
Many have diversified, spreading their deposits among several banks, while others have converted time deposits into ordinary deposits — guaranteeing they will be safe for at least another year — and are waiting to see how the government responds in the event there are serious repercussions from imposing the refund limit.
BOJ data show corporate and individual savers as well as municipal governments withdrew a net 25.9 trillion yen in time deposits of more than 10 million yen per account during the one-year period through Dec. 31.
The figure accounts for 21 percent of the current total of time deposits of that class, which means a hefty 124 trillion yen remains in large-lot time deposits, a sum that could still gradually be withdrawn as of Monday as accounts become due.
During the same one-year period, these savers bolstered ordinary deposits by a net 26.9 trillion yen to 147 trillion yen, according to BOJ data.
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