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

(Excerpt)

(Tuesday, May 11, 2021, 11:06 am to 11:21 am)

[Questions and answers:]

Q.

This morning, there was an announcement that it is true that Aomori Bank and Michinoku Bank in Aomori Prefecture are considering integrating their management. Also, two regional banks in Fukui Prefecture are negotiating for management integration. In this manner, movement toward reorganization among regional banks has become active since the beginning of this year. What do you think of such movement?

A.

Of course, I know that some regional banks and second-tier regional banks in local areas are moving toward management integration recently. However, I will refrain from making any comments on individual cases at this stage, as no official announcement has been made. Nevertheless, generally speaking, regional banks' business environments are actually worsening because of population decline, as seen in cases of the recent integrations in Aomori Prefecture and in Nagasaki Prefecture. Banks can no longer wait in silence for people to come to borrow money. They are facing an unprecedented situation where they have plenty of money and have to look for borrowers. This is an unprecedented situation in the long history of finance, and this tendency is observed globally, not only in Japan. Banks need to change their operations, shifting their focus from the management of deposits to the provision of loans. For that purpose, they have to strengthen their business base for banking and financial services, secure extra funds or enough strength to provide loans to local companies, and thereby offer economic cooperation and contribute to local communities. Such attitude would be important. Individual financial institutions are making efforts at present, I think, and one example is the management integration that you mentioned, but things are often difficult in local areas. Banks that have been in a competitive relationship are now talking about management integration. People inside may feel it difficult, as they have competed in the same area as rivals so far. However, a merger has advantages such as that it suffices to have only one branch in one area and staff members may be reduced and that some other business, not limited to financial services, may be commenced by effectively utilizing surplus resources. Financial institutions generally have branches in good locations, but it is rather difficult for them to utilize such properties, as upper floors cannot be lent out for commercial purposes. The financial industry and banks may be considering various means to better utilize their resources, including the revision of their rules. Anyhow, we think it preferable that financial institutions strengthen their business base through mergers and other efforts to secure sound management, which enables them to offer funding support for local companies and industries. They need to be prepared for the future in consideration of a further population decline and possible closures of local companies.