Press Conference by ASO Taro, Deputy Prime Minister, Minister of Finance, and Minister of State for Financial Services

(Excerpt)

(Friday, November 27, 2020, 10:32 am to 10:42 am)

[Questions and answers:]

Q.

I would like to ask you about the special provisions that went into effect today exempting regional bank mergers from application of the Anti-Monopoly Act. Could you tell us again what the aims of these special provisions are?

A.

The Act on Special Provisions for the Anti-Monopoly Act has indeed gone into force, meaning that the revisions we recently made to the Anti-Monopoly Act will go into effect today. Due to a disparate population decline in their region, two banks in Nagasaki sought to merge so that they could satisfactorily meet the region’s needs, but the Fair Trade Commission pointed out that the merger of these two banks would fall foul of the Anti-Monopoly Act. The two banks struggled to address this issue but, with a variety of guidance provided by the Financial Services Agency, they started their merger this past October. For our part, whether to carry out a merger or not is a matter for financial institutions to decide on their own, and we in no way urged them to pursue a merger. It is of the utmost importance that mergers be based on management decisions made by the financial institutions involved, and our concern is not whether a merger helps the banks survive by strengthening their financial functions but rather whether the banks will utilize their financial intermediary functions to boost the added value of regional companies. If banks do not shore up their finances so they can help regional companies stay in business and if they do not have the wherewithal to respond when asked to provide funds, this could have an extremely large impact on the region. Therefore, we will provide as much support as possible to ensure that business foundation is reinforced, and I think that the recent revisions to the Anti-Monopoly Act will be useful in that regard. In any case, we are hoping to set up a support desk at the FSA to support regional banks integrating their management and restructuring. In restructuring regional finance through this support desk, there will likely be times when disparities between two banks – differing computer systems, for example – create a variety of challenges, and there have likely been major banks thrown into confusion when two banks merge with another bank headed by someone who does not understand computers and the three companies all have different hardware. Take Mizuho Bank. Three banks with different computer systems - Dai-Ichi Kangyo, Fuji and the Industrial Bank of Japan – were joined together and, as they looked into what to do to get these systems to communicate with each other and if hardware had been invented that could get them to understand each other, it turned out the systems could not be linked up at all. The bank saw problems arise as a result. There are many issues that we need to address to ensure something like that does not happen, and we must provide support via approaches that can be pursued while considering these issues together in a centralized fashion. Some regional financial institutions may operate in regions where the population is dropping and the industrial infrastructure has deteriorated somewhat and, given that, we need to consider a variety of modalities for regional banks. The purpose of regional financial institutions is not simply to ensure their own survival, which is meaningless unless they are able by surviving to contribute to regional companies and residents. We very much hope to provide across-the-board support to help them maintain their financial and administrative capabilities as far as possible.