Seeking to reassure markets of their financial stability, top executives of the nation’s four biggest banking groups insisted Friday they do not require another injection of public funds.
They made the comments during a hearing before the Lower House’s Committee on Financial Affairs.
Summoned to speak on the government’s latest proposals to accelerate disposal of banks’ bad loans, bank presidents said they would be able to halve bad-loan levels without the use of public money.
The government has set a target of reducing nonperforming loans at banks by half by the end of fiscal 2004.
“We do not want to rely on public funds,” said Terunobu Maeda, president and CEO of Mizuho Holdings, Inc., the nation’s largest banking group. “That is not the way we want to run our bank.”
In response to a question on how he will take responsibility if Mizuho ends up needing public funds anyway, however, Maeda merely stated, “It is my responsibility to do my best to return (public funds previously injected in 1998 and 1999).”
Masashi Teranishi, president of UFJ Bank, also emphasized that no public funds are needed for his bank, even though UFJ shares continued to face selling pressure, reflecting investor concern over the lender’s financial health.
The share price for UFJ Holdings Inc., the holding company for the banking group, fell 3.57 percent Friday from the previous day to close at 108,000 yen.
UFJ Holdings said in a statement later in the day that its stock prices “do not reflect business reality” at the bank.
For the April-September period, the group is estimated to have earned 72 billion yen in profits and maintained a capital-to-asset ratio of 11 percent — comfortably above the 8 percent required for international operations, it said.
Some of the bank presidents charged that the government’s recent proposals for bank loan disposals were to blame for the market jitters.
“Huge anxiety grips market sentiment,” said Yoshifumi Nishikawa, president of Sumitomo Mitsui Banking Corp.
He said the government, in its economic package released at the end of October, merely stated its “intentions” and “requests” but failed to spell out how far it plans to go in pushing for bad loan disposal.
“We at the banks would like the government to make clear what exactly it means to do,” he said.
Concerning the creation of a public-private “Industrial Rehabilitation Corp.” to rehabilitate problem borrowers, Nishikawa also said that such efforts should ideally be left to the bank and the indebted companies concerned, not the government.
“There is no single standard that holds for all companies on whether they can be rehabilitated or not,” he said.
Government involvement in the screening of borrowers — weeding out firms with little prospect of rehabilitation — was a potentially dangerous concept, he added.
Shigemitsu Miki, president and CEO of Mitsubishi Tokyo Financial Group, Inc. urged the government to first tackle deflationary pressures gripping the economy, which he pointed to as the reason the volume of bad loans continue to rise.
“Both bad loans and deflation are problems,” he told the Diet committee, “but if pressed, I would say deflation-fighting measures should come first.”
Problems not serious
Financial Services Minister Heizo Takenaka said Friday he does not think Japan’s major banks are in serious financial straits, despite plunges in their share prices.
“I do not think major banks have serious problems with their financial health now,” Takenaka said.
But banks do have some issues to tackle, he said, urging them to make maximum efforts to dispose of nonperforming loans.
Takenaka, who is also economic and fiscal policy minister, made the remarks in reference to the plunges in share prices of leading banks Thursday, partly triggered by a British newspaper report the government may nationalize one of Japan’s four top banks in December.
On Thursday, the benchmark Nikkei index plunged to a fresh 19-year low on fierce selling of bank shares, after having sunk to a previous 19-year low a day earlier.
The Times paraphrased Hiroshi Okuda, chairman of the Japan Business Federation (Nippon Keidanren), as hinting in an interview with British media Wednesday that at least one of Japan’s four top banking groups could be nationalized.
Nippon Keidanren later denied Okuda had made any such a remark and lodged a protest with the newspaper.
Takenaka said it is undesirable that share prices fluctuate in reaction to rumors.
“We will continue to closely monitor the markets with great interest,” he said.
Industrial revival minister Sadakazu Tanigaki said separately that recent plunges in share prices show investor confidence has cooled.
Investors “are skeptical that hardline steps will be taken” following the Oct. 30 release of an economic package aimed at overcoming deflation and speeding up the disposal of nonperforming loans, Tanigaki said.
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