This document summarizes a presentation given by Masahiro Kawai on Japan's banking system from the economic bubble and crisis through reconstruction efforts. It describes the macroeconomic developments leading to the banking crisis, including stagnant growth, deflation, and the bursting of the asset price bubble. It then examines the causes of the banking crisis, including overextended lending during the bubble, the impact of asset price deflation, and the government's failure to quickly address the problems. The document outlines the impact on the banking sector and policies put in place for restructuring, including public capital injections and disposal of non-performing loans.
Lecture 12 The Bubble Burst and RecessionRayman Soe
After World War II ended in 1945, Japan made a new start toward economic reconstruction as a democratic and pacifist state. Thanks to its highly educated and abundant labor force and to the concentration of capital and resources in certain key industries, such as electric power and steel, Japan succeeded in recovering from the ruins of war and achieving industrialization during the 1950s and 1960s.
Lecture 12 The Bubble Burst and RecessionRayman Soe
After World War II ended in 1945, Japan made a new start toward economic reconstruction as a democratic and pacifist state. Thanks to its highly educated and abundant labor force and to the concentration of capital and resources in certain key industries, such as electric power and steel, Japan succeeded in recovering from the ruins of war and achieving industrialization during the 1950s and 1960s.
Overview of GLOBAL FINANCE CRISIS and impact with market. Impacts of the US Financial Crisis on Indian Economy. FINANCE CRISIS, Subprime Mortgage Crisis, US Financial Markets, US Unemployment and Stock Market Returns, Treasury Rates and Inflation,
After World War II ended in 1945, Japan made a new start toward economic reconstruction as a democratic and pacifist state. Thanks to its highly educated and abundant labor force and to the concentration of capital and resources in certain key industries, such as electric power and steel, Japan succeeded in recovering from the ruins of war and achieving industrialization during the 1950s and 1960s.
Financial Liberalization and Regulatory Changes in KoreaK Developedia
Title: Financial liberalization and regulatory changes in Korea
Material Type: Report
Author: Kim, Joon-Kyung; Park, Yung Chul
Publisher: KDI School; Korea University
Date: 2011-10
Event: KDI 개원 40주년 기념 국제회의: 민주화와 세계화 시대 한국경제의 성과와 과제 (In celebration of the 40th anniversary of Global Summit: Results and Prospects of the Korean Economy in the Age of Democracy and Globalization)
Pages: 44
Language: English
File Type: Documents
Original Format: pdf
Subject: Economy; Financial Policy Economy; Macroeconomics; International Economic Policy; Financial Opening
Holding: KDI; KDI School of Public Policy and Management
The financial risk management will reduce the level of distressed economy and increase management of wealth that streamline with financial network technologies, monetary circuit, digital currencies, economic security and global finance to continue manage and regulate the complicated macroeconomic activities.
The 2018 edition of the OECD Business and Finance Outlook addresses connectivity, both among institutions within the global financial system and among countries. Almost a decade on from the 2008 financial crisis, the Outlook examines new risks to financial stability that will put financial reforms to the test, focusing in particular on the normalisation of monetary policy, debt problems and off-balance sheet activity in China. It also examines how supply-side and demand-side policies can help ensure foreign infrastructure investment is high quality, sustainable and works for all, with particular reference to China’s Belt and Road Initiative. Find out more information at https://oe.cd/2lH
The Financial Situation in the World by Wouter van der StokFelix Meißner
The Financial Situation in the World” by Wouter van der Stok
Mr. Van der Stok will present a brief history of the present global Economic/Financial Crisis, an analysis of future developments of this Crisis over the next 3 to10 years and how this will affect, without any exception, "me" as a person, family, business, city, nation and groups of nations
HERE YOU FIND THE RECORDING:
http://tinyurl.com/5vcl5hd
Professor Yashiro, one of Japan's leading economists, will look at the results of Abenomics (a term coined to describe Japan's economic policy while Shinzo Abe was premier) and Prime Minister Kishida's plans for what he calls a "New Capitalism."
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
Overview of GLOBAL FINANCE CRISIS and impact with market. Impacts of the US Financial Crisis on Indian Economy. FINANCE CRISIS, Subprime Mortgage Crisis, US Financial Markets, US Unemployment and Stock Market Returns, Treasury Rates and Inflation,
After World War II ended in 1945, Japan made a new start toward economic reconstruction as a democratic and pacifist state. Thanks to its highly educated and abundant labor force and to the concentration of capital and resources in certain key industries, such as electric power and steel, Japan succeeded in recovering from the ruins of war and achieving industrialization during the 1950s and 1960s.
Financial Liberalization and Regulatory Changes in KoreaK Developedia
Title: Financial liberalization and regulatory changes in Korea
Material Type: Report
Author: Kim, Joon-Kyung; Park, Yung Chul
Publisher: KDI School; Korea University
Date: 2011-10
Event: KDI 개원 40주년 기념 국제회의: 민주화와 세계화 시대 한국경제의 성과와 과제 (In celebration of the 40th anniversary of Global Summit: Results and Prospects of the Korean Economy in the Age of Democracy and Globalization)
Pages: 44
Language: English
File Type: Documents
Original Format: pdf
Subject: Economy; Financial Policy Economy; Macroeconomics; International Economic Policy; Financial Opening
Holding: KDI; KDI School of Public Policy and Management
The financial risk management will reduce the level of distressed economy and increase management of wealth that streamline with financial network technologies, monetary circuit, digital currencies, economic security and global finance to continue manage and regulate the complicated macroeconomic activities.
The 2018 edition of the OECD Business and Finance Outlook addresses connectivity, both among institutions within the global financial system and among countries. Almost a decade on from the 2008 financial crisis, the Outlook examines new risks to financial stability that will put financial reforms to the test, focusing in particular on the normalisation of monetary policy, debt problems and off-balance sheet activity in China. It also examines how supply-side and demand-side policies can help ensure foreign infrastructure investment is high quality, sustainable and works for all, with particular reference to China’s Belt and Road Initiative. Find out more information at https://oe.cd/2lH
The Financial Situation in the World by Wouter van der StokFelix Meißner
The Financial Situation in the World” by Wouter van der Stok
Mr. Van der Stok will present a brief history of the present global Economic/Financial Crisis, an analysis of future developments of this Crisis over the next 3 to10 years and how this will affect, without any exception, "me" as a person, family, business, city, nation and groups of nations
HERE YOU FIND THE RECORDING:
http://tinyurl.com/5vcl5hd
Professor Yashiro, one of Japan's leading economists, will look at the results of Abenomics (a term coined to describe Japan's economic policy while Shinzo Abe was premier) and Prime Minister Kishida's plans for what he calls a "New Capitalism."
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
The Evolution of Non-Banking Financial Companies (NBFCs) in India: Challenges...beulahfernandes8
Role in Financial System
NBFCs are critical in bridging the financial inclusion gap.
They provide specialized financial services that cater to segments often neglected by traditional banks.
Economic Impact
NBFCs contribute significantly to India's GDP.
They support sectors like micro, small, and medium enterprises (MSMEs), housing finance, and personal loans.
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
1. JAPAN’S BANKING SYSTEM:
FROM THE BUBBLE AND CRISIS TO
RECONSTRUCTION
Masahiro Kawai
Institute of Social Science
University of Tokyo
Japan
Center for Global Partnership Conference
“Macro/Financial Issues and International Economic Relations:
Policy Options for Japan and the United States”
Tokyo, May 13, 2004
2. PRESENTATION
I. INTRODUCTION
II. MACROECONOMIC DEVELOPMENTS
AND THE BANKING SECTOR
III. CAUSES OF THE BANKING SECTOR
CRISIS AND DIFFICULTIES
IV. IMPACT OF BANKING SECTOR
DISTRESS
V. POLICY FRAMEWORKS FOR BANK
RESTRUCTURING AND ITS PROGRESS
VI. CONCLUDING REMARKS
3. I. INTRODUCTION
• What are the factors behind the recent banking sector
difficulty, particularly the 1997-98 systemic crisis, in
Japan?
• Why did the government fail to address the problem
early, quickly and decisively?
• Since the crisis, has the FSA formulated and
implemented a comprehensive policy to resolve banking
sector problems?
• Has there been sufficient progress on financial sector
and corporate sector restructuring?
• Is the worst over in the Japanese banking system? Is the
banking sector solvent? What are risks?
• What should be done to transform the Japanese banking
system into a competitive market-based system?
4. II. MACROECONOMIC DEVELOPMENTS
AND THE BANKIG SECTOR
1. Macroeconomic Performance and Policy
• Output stagnation (Figure 1) : The average annual growth rate
of real GDP was 1.1 percent during the last decade, 1992-2002.
Near-zero growth (0.1%) in 1998-2002. In addition, nominal
GDP has been more stagnant (-1.2% in 1998-02).
• Price deflation (Figure 2) : The average annual inflation rates
during 1992-2002 were low or negative at 0.2% for CPI and -
0.1% for GDP price deflators. The GDP deflator fell in 1995-
2002 (except 1997) at 1.0% per year and CPI fell in 1999-2002
at 0.7% per year.
• High unemployment rate, reaching a peak of 5.5%.
• Keynesian fiscal spending in 1992-2002, rising from the
average size of 32% of GDP in 1991 to 39% in the early 2000s,
with a declining fiscal revenue (from 34% of GDP in 1991 to
31% recently).
5. Figure 1. Japan's Nominal GDP and Real GDP, 1980-2003
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
1980 1985 1990 1995 2000
Annual
Rates
of
Change
in
GDP
(%)
Nominal GDP Real GDP
6. Figure 2. Japan's Price Developments―GDP Deflator, Consumer Price Index (CPI),
a n d D o m estic C o r p o r a te G o o d s P r ice I n d ex (D C G P I ), 1 9 8 0 -2 0 0 3
-5.0
0.0
5.0
10.0
15.0
1980 1985 1990 1995 2000
Annual
Rates
of
Change
in
Price
Indices
(%)
GDP Deflator Consumer Price Index Domestic Corporate Goods Price Index
7. II. MACROECONOMIC DEVELOPMENTS
AND THE BANKIG SECTOR (cont’d)
2. Asset Prices
• There was an asset price bubble in the late 1980s.
The increases in asset prices were much faster than
nominal GDP (Figure 3).
• The equity price reached its peak in December 1989
and has since then declined as a trend.
• The urban land price for six major city areas reached
its peak in September 1991 and since then has been
declining persistently.
• Relative to nominal GDP (1980=100), the land price
became lower in 1996 and the equity price in 2002.
8. Figure 3. Japan's Asset Prices―Stock and Land Prices―and Nominal GDP, 1980-2003
100
150
200
250
300
350
400
450
500
550
600
1980 1985 1990 1995 2000
Asset
Prices
and
Nominal
GDP
(1980=100)
Urban Land Price Index of Six Large City Areas TOPIX Nominal GDP
9. II. MACROECONOMIC DEVELOPMENTS
AND THE BANKIG SECTOR (cont’d)
3. Banking Sector Conditions
• Expansion of bank loans in the late 1980s, together with the
expansion of bank deposits (Figure 4). Loans were extended to
firms with assets such as land as a collateral.
• Loans were concentrated in wholesale and retail trade, real estate,
finance and insurance, and construction (Table 1).
• The bursting of the bubble in the early 1990s made highly
indebted firms in these sectors unable to repay due to the decline
in collateral values, thus creating non-performing loans (NPLs).
• But bank exposure to certain sectors, such as real estate and
construction, continued to expand until the second half or the
middle of the 1990s.
• As a result, NPLs rapidly increased in the banking sector, and the
banking system fell into a systemic crisis in 1997-98.
12. III. CAUSES OF THE BANKING CRISIS
1. Overextension of Loans during the Bubble Period
Several factors led to loan overextension in the second half of
the 1980s.
• Financial liberalization and greater opportunities for risk-
taking: Financial liberalization in the mid-1980s allowed
small financial institutions to venture into new areas,
particularly funding housing finance companies (Jusen) and
other real estate investments.
• Shifts in bank clients to non-manufacturing firms: With large
firms increasingly having access to capital markets, major
banks began to direct their loans towards non-manufacturing
firms, like in real estate, construction and SMEs,
• Unwarranted expectations of high economic growth.
• Low interest rate policy.
• Weak corporate governance on the part of banks.
13. III. CAUSES OF THE BANKING CRISIS
(cont’d)
2. Severe Negative Impact of Asset Price Deflation
• Rapid credit growth had been accompanied by a doubling
of stock prices and a massive rise in commercial estate
prices, particularly in major cities.
• A sharp increase in interest rates and the introduction of
credit ceiling on bank loans to real estate-related activity
led to the bursting of the asset price bubble.
• The bursting of the bubble created substantial losses for
firms that held equities and had borrowed from banks with
real estate as a collateral.
• This transformed overextended loans into non-performing
loans, and the large build-up of capital investment and
labor employment during the bubble period into excesses.
• Asset price deflation has continued for more than ten years.
14. III. CUASES OF THE BANKING CRISIS
(Cont’d)
3. Policy Failure to Contain the Problem Quickly
• Policymakers initially had a strong bias against the
bubble and continued to suppress asset prices even after
the price collapse.
• Hesitation in taking decisive measures for fear that it
might touch off a banking sector panic.
• The initial approach was based on the expectation that a
resumption of economic growth would restore financial
health of banks and their clients.
• Keynesian fiscal policy sustained minimum growth.
• There was no domestic or external pressure to accelerate
the resolution of banking problems.
15. IV. IMPACT OF BANKIG DISTRESS
1. Collapse of the Traditional “Convoy System”
• Until the 1990s, the process for managing bank failure was largely
ad hoc, based on the informal “convoy system.”
• Using its branch licensing authority, MOF encouraged stronger,
healthier banks to absorb insolvent institutions through informal,
administratively orchestrated, bank P&A transactions.
• In addition, BOJ often provided liquidity assistance to prevent
systemic crises.
• But it became increasingly difficult to persuade banks to provide
assistance to other troubled banks because even relatively strong
banks faced serious NPL problems.
• Major shareholders and firms associated with Hokkaido
Takushoku Bank, Yamaichi Securities and Sanyo Securities
refused to help them. Relatively strong banks also refused to
provide assistance.
• Temporary nationalization of the Long-Term Credit Bank of Japan
in October 1998 signified the end of the “convoy system.”
16. IV. IMPACT OF BANKIG DISTRESS
(cont’d)
2. Downsizing of Bank Business
• One response to the banking crisis has been further
deregulation, rather than stopping it, along with the
principle of “Financial Big Bang,” and the encouragement
of mergers and consolidation.
• The temporarily nationalized LTCB was sold to foreign
stakes.
• Commercial banks have been forced to rethink their
business strategies by downsizing their operations
-End of quantitative targets (maximization of deposit
collection and loan extension)
-Focus on core competency
-Retreat from foreign operations
17. IV. IMPACT OF BANKIG DISTRESS
(cont’d)
3. Impacts on Monetary and Fiscal Policy
• Commercial banks with large NPLs have not been expanding
loans, and indebted firms have had no appetite to borrow, and
instead have been repaying their bank loans to reduce debt.
• Weaker monetary transmission mechanisms:
-Under the zero interest rate policy, BOJ switched to
“quantitative easing” (March 2001) providing liquidity to the
banking sector. Monetary base has been growing relatively
fast, but M2&CD has not been growing as fast (Figure 5).
-Absence of banks’ normal financial intermediary function
weakens monetary policy transmission mechanisms.
• Fiscal worsening: Rise in government spending, decline in
tax revenue, large budget deficits and mounting public debt.
18. Figure 5. Japan's Money Supply and Bank Loans, 1980-2003
-5
0
5
10
15
20
25
30
1980 1985 1990 1995 2000
Annual
Rates
of
Change
in
Average
Outstanding
(%)
Monetary Base M2+CD Domestic Bank Loans
19. V. POLICY FRAMEWORKS FOR BANK
RESTRUCTURING AND ITS PROGRESS
1. Stabilization of the Banking System
• The banking sector was in systemic crisis in late 1997 to
1998. The banking sector has been stabilized since then
due to more decisive policy actions.
• Means of stabilizing the banking sector:
-Blanket deposit guarantee
-Extension of emergency liquidity assistance to troubled
banks
-Financial assistance to promote mergers among troubled
financial institutions
-Decision to inject capital to weak but viable banks
-Temporary nationalization of non-viable banks
20. V. POLICY FRAMEWORKS FOR BANK
RESTRUCTURING AND PROGRESS (cont’d)
2. Bank Restructuring
• Public recapitalization (March 1998, March 1999, May
2003). See Table 2.
• Recognition of NPLs—with tighter loan classification and
loan loss provisioning—helps not only identify the size of
NPLs but also prompts faster NPL disposals
• Disposal of bank NPLs, close to 90 trillion yen in the last
ten years. Despite disposals, bank NPLs have not declined
fast due to the emergence of new NPLs (Table 3).
• Exit of a number of inefficient deposit-taking institutions.
• Establishments of public AMCs (RCC, IRC) has
encouraged the carving out of NPLs.
21. Table 2. Public Capital Injection into the Banking System, March 1998 and
1999
(Billions of yen)
March 1998 March 1999
Banks
Total Preferred
Shares
Subord.
Debt.(a)
Subord.
Loans
Total Preferred
Stocks
Subord.
Debt
City Banks
Tokyo Mitsubishi 100 0 100 0 -- -- --
Daiichi Kangyo 99 99 0 0 900 700 200
Sakura 100 0 100 0 800 800 0
Sumitomo 100 0 100 0 501 501 0
Fuji 100 0 100 0 1,000 800 200
Sanwa 100 0 100 0 700 600 100
Tokai 100 0 0 100 600 600 0
Daiwa 100 0 0 100 408 408 0
Asahi 100 0 0 100 500 400 100
Long-Term Credit Banks
Industrial Bank of Japan 100 0 100 0 600 350 250
Long-Term Credit Bank(b)
176.6 130 0 46.6 -- -- --
Nippon Credit Bank(b)
60 60 0 0 -- -- --
Trust Banks
Mitsubishi Trust Bank 50 0 50 0 300 200 100
Sumitomo Trust Bank 100 0 100 0 200 100 100
Mitsui Trust Bank 100 0 100 0 400.2 250.2 150
Yasuda Trust Bank 150 0 150 0 -- -- --
Toyo Trust Bank 50 0 50 0 200 200 0
Chuo Trust Bank 60 32 0 28 150 150 0
Regional Banks
Yokohama Bank 20 0 0 20 200 100 100
Hokuriku Bank 20 0 0 20 -- -- --
Ashikaga Bank 30 0 30 -- -- --
Total 1,815.6 321 1,080 414.6 7,459.2 6,159.2 1,300
Note: (a) These debentures are generally of a consol nature and are therefore considered upper tier-2
capital. The only exceptions are those issued by Sanwa Bank and the Industrial Bank of Japan
whose debentures are of fixed (10-year) duration and are therefore lower tier-2 capital, which is
limited to no more than half of tier-1 capital.
(b) These banks were granted only part of the injection for which they applied.
Source: Deposit Insurance Corporation and the Financial Reconstruction Commission.
22. Table 3. Outstanding Stock and Disposals of Non-Performing Loans, All Domestically Licensed Banks
(End of Fiscal Year)
(Unit: Billion yen)
FY1992 FY1993 FY1994 FY1995 FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002
Non-performing Loans:
Outstanding Stock
--
(12,774)
--
(13,576)
--
(12,546)
28,504
(21,868)
21,789
(16,491)
29,758
(21,978)
29,627
(20,250)
30,366
(19,772
32,515
(19,281)
42,028
(27,626)
34,849
(20,433)
Loan Loss Provision:
Outstanding Stock
--
(3,698)
--
(4,547)
--
(5,536)
13,293
(10,345)
12,334
(9,388)
17,815
(13,601)
14,797
(9,258)
12,230
(7,678)
11,555
(6,939)
13,353
(8,657)
12,585
(7,897)
NPL Disposals --
(1,640)
--
(3,872)
--
(5,232)
13,369
(11,067)
7,763
(6,210)
13,258
(10,819)
13,631
(10,440)
6,944
(5,398)
6,108
(4,290)
9,722
(7,721)
6,658
(5,104)
New Net LLP --
(945)
--
(1,146)
--
(1,402)
7,087
(5,576)
3,447
(2,534)
8,403
(6,552)
8,118
(15,490)
2,531
(1,339)
2,732
(1,371)
5,196
(3,806)
3,101
(2,042)
Direct Write-offs --
(424)
--
(2,090)
--
(2,809)
5,980
(5,490)
4,316
(3,676)
3,993
(3,501)
4,709
(4,268)
3,864
(3,609)
3,072
(2,650)
3,974
(3,414)
3,520
(3,038)
Other --
(271)
--
(636)
--
(1,022)
302
(1)
0
(0)
863
(766)
804
(683)
548
(449)
304
(269)
552
(501)
37
(25)
Operating Profits 4,685 4,439 4,484 6,753 6,418 5,503 3,129 4,675 4,768 4,693 4,674
Total Loans:
Outstanding Stock
474,783 477,150 477,801 482,701 482,312 477,979 472,610 463,484 456,965 440,610 423,286
NPL/Total Loan (%) -- -- -- 5.91 4.52 6.23 6.27 6.55 7.12 9.54 8.23
Capital Adequacy Ratio (%) -- -- -- -- -- -- 10.06 10.88 10.75 10.12 9.52
Note: (1) Data in the table are figures for the Banking Accounts of All Domestically Licensed Banks (i.e., city banks, long-term credit banks, trust banks, and
regional banks) while data in parentheses are those for city banks, long-term credit banks and trust banks. Data for operating profits and capital adequacy
ratios also include foreign trust banks.
(2) Non-performing loans in this table refer to “risk management loans” (losses+loans more than 3 months overdue+loans with term restructured), except
that the definitions prior to FY1997 are slightly different: they are losses + overdue loans for FY1992-94 and losses+loans more than 6 months overdue+
loans with interest reduced for FY1995-96.
(3) The capital adequacy ratio is the ratio of capital to risk assets.
Source:Financial Services Agency; Bank of Japan.
23. V. POLICY FRAMEWORKS FOR BANK
RESTRUCTURING AND PROGRESS (cont’d)
3. Bank Business Strategies and Consolidation
• Consolidation of city banks into four major financial groups
and one weak group (Table 4).
-Mizuho Financial Group (January 2003)
-Sumitomo Mitsui Financial Group (December 2002)
-Mitsubishi Tokyo Financial Group (April 2001)
-UFJ Holdings (April 2001)
-Resona Holdings (December 2001).
• Banks’ strategic objectives:
-Gaining maximum market power in a niche market
-Attaining economies of scale
-Investing in IT
-Investment banking, asset management, fee-based business
24. Table 4: Banking Groups and Consolidated Assets
(Billions of yen)
New Groups Major Subsidiary Banks Former Banks Consolidated Assets
March 2003
End
(a)
1. Mizuho Financial Group
(MHFG)
(Established in January 2003)
Mizuho Bank, Mizuho
Corporate Bank, Mizuho
Trust & Bankig
Industrial Bank of Japan,
Daiichi Kangyo, Fuji,
Yasuda Trust Banks
134,033
2. Sumitomo Mitsui Financial
Group (SMFG)
(Established in December 2002)
Sumitomo Mitsui
Banking Corporation
(SMBC)
Sumitomo Bank, Sakura
Bank
102,395
3. Mitsubishi Tokyo Financial
Group (MTFG)
(Established in April 2001)
Bank of
Tokyo-Mitsubishi (BTM),
Mitsubishi Trust &
Banking Corporation
Bank of
Tokyo-Mitsubishi (BTM),
Mitsubishi Trust Bank,
Nippon Trust Bank
96,532
4. UFJ Holdings
(Established in April 2001)
UFJ Bank, UFJ Trust
Bank
Sanwa Bank, Tokai Bank,
Toyo Trust & Banking
80,207
5. Resona Holdings
(Established in December 2001)
Resona, Saitama Resona,
Kinki Osaka, Nara Banks,
Resona Trust & Banking
Asahi Bank, Daiwa Bank 42,892
Source: Individual groups’ website.
25. V. POLICY FRAMEWORKS FOR BANK
RESTRUCTURING AND PROGRESS (cont’d)
4. Linkages with Corporate Restructuring
• Corporate sector restructuring is the mirror image of bank
NPL resolution. Resolution of bank NPLs requires real
operational restructuring and revitalization of corporations.
• Market-based restructuring—like direct sales of NPLs to the
market—is key.
• Three frameworks to accelerate corporate restructuring:
-Legal insolvency procedures (Table 5), particularly the
Civil Rehabilitation Law (April 2000)
-A framework of voluntary out-of-court negotiations for
corporate restructuring—based on the London rules of
INSOL—including debt-equity swaps
-Restructuring through the RCC and IRC
26. Table 5. Legal and Instituional Changes to Facilitate Corporate
Restructuring
Year Changed Laws, Procedures and Institutions Contents
1997 Commercial Codes Procedures for corporate mergers rationalized.
December 1997 Anti-Monopoly Law Establishment of pure holding companies allowed.
March 1998 Financial Holding Company Law Establishment of financial holding companies
allowed.
1999 Commecial Codes Share swaps introduced; procedures related to parent
and subsidiary companies rationalized.
April 1999 Resolution and Collection
Corporation (RCC)
A colletion company to purchase and sell collateral-
based NPLs—“in danger of bankruptcy” or blow.
April 2000 Civil Rehabilitation Law (Minji
saisei Ho)
Facilitates filings and decisions for large number of
firms
2000 Commercial Codes Procedures for corporate splits introduced.
September 2001 Voluntary procedures for corporate
debt restructuring based on the
London rules (by INSOL)
Guidelines for debt forgiveness agreed.
April 2003 Corproate Restructuring Law
(Kaisha kosei Ho)
Restructuring provisions eased and some flexibility
allowed in the restructuring measures in line with
those of the Civil Rehabilitation Law.
April 2003 Industrial Revitalization
Corporation of Japan (IRCJ)
Resturucturing of large firms made easier through
purchase of NPLs from all non-main bank creditors.
Source: Financial Services Agency, Ministry of Finance, OECD.
27. V. POLICY FRAMEWORKS FOR BANK
RESTRUCTURING AND PROGRESS (cont’d)
5. Regulatory and Supervisory Reforms
• Overhauling of the regulatory system and the creation of
the FSA (June 1998).
• Prudential norms
-Loan classification and LLP tightened (Program for
Financial Revival, Oct. 2002)
-Quality of capital—treatment of deferred tax credits
-Prompt corrective action fully in place
-After a delay, planned reintroduction of a limited (partial)
deposit insurance in April 2005
• Resolution of 50 percent of NPLs within a year, and 80
percent of NPLs within two years.
28. VI. CONCLUDING REMARKS
• The bubble in the late 1980s and its collapse were largely
responsible for the emergence of NPLs and the banking
sector problem over the last 10 years.
• But the root cause of the problem lied in the lack of prudent
risk management by banks.
• The government failed to tackle the problem because of:
underestimation of the seriousness of the problem;
optimistic expectations of growth; sustained fiscal spending
and lack of domestic hardship; lack of domestic and
external constraints.
• A more comprehensive framework for bank restructuring
put in place since the 1997-98 crisis: temporary
nationalization and subsequent sales of non-viable banks;
recapitalization of weak banks; tighter bank regulation and
supervision; new institutions for bank restructuring.
29. VI. CONCLUDING REMARKS (cont’d)
• Sufficient progress has been made: stabilization of the
banking system, restructuring and consolidation of bank
businesses and new incentives for corporate restructuring
• Restoration of a healthy banking system requires: adequate
capital base and loan loss provisions; reestablishment of
profitable banking business; prudent risk management.
• Recapitalization of banks using public money in itself does
not resolve bank NPL problems. Sustained improvements
of cash-flows and profitability are needed through better
bank management and focus on core competency.
• The banking sector is largely solvent. The risks are
concentrated in regional, vulnerable banks to weak local
conditions and hikes of the long-term interest rate.