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February 1, 1999 Hisaya Nara, Co-Chairman Committee on the Financial System Keidanren |
The task of creating guidelines with a high degree of transparency for classifying loans according to their soundness and establishing write-off/allowance standard for loans is essential from the point of view of promoting financial system stability. It is also an initiative that Keidanren (Japan Federation of Economic Organizations) has been strongly advocating for some time.
The interim draft of the financial inspection manual announced by the Financial Supervisory Agency merits praise for its efforts to transform financial inspections from a heavily bureaucratic process into a self-supervised one and for shifting the focus of inspections to the management of risk, rather than assessment of assets. These features are certain to boost confidence in Japan's financial system both domestically and abroad.
Given the current situation of the Japanese economy, however, we urge the government to give due consideration to the following three items:
The financial inspection manual should be implemented in a manner that is consistent with the two large economic stimulus packages implemented last year and the various other measures taken to spur economic growth and ease the credit crunch.
The inspection guidelines for self-assessed items should take into full account the distinctive nature of each type of loan.
Companies should basically be allowed to pursue independent management activities based on the concept of self-accountability. As for the role of the board of directors, ample consideration should be given to the interpretation of the Commercial Code and and other laws and to the current discussion within the Liberal Democratic Party to amend those provisions of the Commercial Code that relate to corporate governance.
Keidanren regards the financial inspection manual to cover the inspection of financial institutions as stipulated in the Bank Law.