I am Takeshi Kunibe, President & CEO of Sumitomo Mitsui Banking Corporation. On this occasion of the board of directors meeting, I am honored to accept the position of chairman of the Japanese Bankers Association for the second time, assuming the role from my predecessor, Mr. Yasuhiro Sato. Over the next year, I will strive to make a valuable contribution in this key role. Thank you in advance for your cooperation and support.
Before talking about my plans for the future upon being appointed, I would like to take this opportunity to express my gratitude for Mr. Sato. Looking back, the past year has seen increased volatility in the global economy and financial markets due to various international risk factors, and the management environment has continued to undergo major changes. Under these difficult circumstances, Mr. Sato has led the banking sector by demonstrating remarkable leadership in response to a wide range of issues, including providing timely opinions on international financial regulations and public financing, considering expansion of the Zengin System’s operating hours, addressing the double loan problem with regard to earthquake recovery, and handling financial crimes such as bank transfer fraud, so called “furikome sagi.” I would like to express my profound admiration and appreciation for his efforts. Thank you, Mr. Sato.
Moving on, let us consider the general environment surrounding the banking sector. The global economy continues to experience gradual growth centering on developed nations, but it is facing the risk of a downturn, due to the slowdown of emerging countries such as China and resource-rich countries. Furthermore, the situation in the Middle East is growing more turbulent, the North Korea problem is becoming more serious, and resource prices continue to stagnate, thus there are ongoing factors that are encouraging risk lowering in global financial markets.
Domestically, the economy has fundamentally remained in a virtuous cycle in recent times and continued its steady recovery. However, given the slowdown of foreign economies, the future outlook remains unclear. In January of this year, with the reversal of the deflationary mindset taking longer than expected, the Bank of Japan introduced negative interest rates for the first time ever, demonstrating its firm intention toward overcoming deflation. Meanwhile, with the aim of creating “a Society in Which All Citizens are Dynamically Engaged,” the Abe administration introduced a new third arrow as part of the second stage of its Abenomics program. I believe that in the future, a variety of specific policy measures will be proposed as part of Japan’s Plan for Dynamic Engagement of All Citizens, and it is expected that, in order to achieve sustained economic growth, the government will overhaul so-called bedrock regulations and further advance initiatives relating to growth strategy and fiscal soundness, such as TPP.
In view of the environment which I described above, I would like to make this fiscal year “a year in which we support the overcoming deflation and the achievement of economic recovery”. This year will be crucial in determining whether Japan can succeed in overcoming the deflation that has persisted for many years and get back on track for sustained economic growth. With uncertainty and instability growing in the global economy and financial markets, the environment makes it extremely difficult to steer government policy and corporate management, but it is essential to maintain a strong, virtuous economic cycle and realizing economic recovery. In light of this, I believe we in the banking sector can play a role in eliminating domestic deflation and realizing economic recovery through actively supporting the growth of customers and initiatives promoting innovation by carefully monitoring changes in the environment and serving as financial intermediaries. This year will be one in which the true value of finance is evaluated, and as banking industry, I would like us to remain steadfast in supporting the overcoming domestic deflation and encourage economic recovery. More specifically, we will conduct its activities around the following “three goals” during this year.
The first goal is “to perform every function of financial intermediation that helps to promote a virtuous economic cycle.” The Japanese economy has almost reached the point where the deflation end, and in order to accelerate its progress, it is essential to vigorously promote a virtuous economic cycle through private-sector investment and the like, which will lead to sustained economic growth. To achieve this, we have a vital duty as financial institutions to act as efficient and effective financial intermediaries, and we will continue to steadily carry out this function going forward.
First, at the level of individual bank actions, we will actively contribute to the government’s growth strategy and to revitalization of local economies , in particular by enhancing our financing in industries that have been identified as growth sectors, such as agriculture, green industries, and medical care, and consulting functions, and through initiatives aimed at promoting PFI and PPP activities. Furthermore, in order to accelerate the shift from savings to investment and increase the supply of funds leading to economic growth, our Association will promote the use of NISA and Junior NISA and work to expand the system.
We will also continue to diligently support earthquake recovery. This is indispensable to the revitalization of Japan’s economy, and we will work closely with the government to help achieve it. Moreover, when it comes to the double loan problem, we continue to actively support the recovery and restoration efforts of those affected by the Great East Japan Earthquake. And in April, we also began using new guidelines for assisting victims of natural disasters such as storms and flooding. We are working hard to provide thorough information about these guidelines and ensure their smooth implementation.
The second goal is “to sophisticate financial infrastructure that is secure, reliable and respond to the IT revolution.” For banks, providing financial intermediary and settlement functions, it is vital that banks earn the trust of customers by ensuring our services are completely secure and reliable. This is a fundamental principle of financial transactions. In addition, the technological revolution in areas such as IT is driving a major transformation in the financial sector, making it highly likely that the nature of the financial industry and markets will change in the future. It is increasingly important for us to stay abreast of these trends and leverage them to improve customer convenience and develop Japan’s financial industry. To achieve this, a wide range of issues need to be addressed. A report was prepared by the Financial System Council at the end of last year, which presented many suggestions aimed at enhancing Japan’s settlement services, such as transition to XML telegrams and provision of “low-value remittance”services for international remittance. Through consultation with relevant parties, we will carefully consider offering improved services aligned with the needs of customers.
With regard to 24/7 operation of the Zengin System, which is aimed at offering customers more convenient settlement services, we are making solid progress on measures such as systems development and remain on track to meet the original target of introducing 24/7 operation in 2018. In addition, the bill to revise the Banking Act submitted to the Diet in order to ease the regulations covering investment in IT-related companies by financial groups and promote the consolidation of shared or overlapping business activities within financial groups. These revisions will be extremely significant for the banking sector in terms of promoting FinTech-related initiatives and improving productivity within banking groups. We will continue to hold discussions with the authorities to ensure that banks can provide better services to customers.
With respect to ensuring security and reliability, it is important to keep pursuing countermeasures for financial crime. We will devote effort to eradicating harmful activities such as bank transfer frauds while also striving to prevent illicit money transfers via online banking. Furthermore, in order to combat the threat of cyber attacks, we will continue working to actively enhance cyber security in collaboration with the relevant authorities and block activities connected with antisocial forces. In order for customers to be able to conduct financial and banking transactions with peace of mind, we also intend to maintain our initiatives aimed at financial and economic education and strengthen our efforts to protect users, including seniors.
The third goal is “to establish a robust financial system which does not depend on the economic climate.” A robust financial system is required to perform every function of financial intermediation and support positive movement of companies and individuals, with the aim of developing the Japanese economy. Japan’s financial system has remained in excellent health since the global financial crisis. With the economy and financial markets once again becoming more uncertain and unclear of late, we will keep working to establish a robust financial system that will maintain our ability to serve as financial intermediaries, regardless of the economic environment.
When it comes to international financial regulatory reform, enhancements to international financial regulations such as Basel III and G-SIFIs are being considered. While these would contribute to the stability of the financial system and improve the robustness of banks, there is concern that if taken too far, regulatory enhancements could restrict financial institutions in their capacity as financial intermediaries by increasing their costs and reviewing their activities. With the aim of balancing our goal of financial system stability with sustainable economic growth, we will continue to provide relevant opinions and actively collaborate with the authorities and overseas financial institutions.
From the perspective of establishing a robust financial system, it is important to secure a level playing field for private- and public-sector financial institutions, so, whenever required, we are prepared to keep providing our opinion about the future shape of public financial sector, including Japan Post Bank.
I believe that it is our mission in the banking sector to provide active support from a financial perspective so that Japan’s economy can successfully take the first step toward sustainable growth. This year is one in which the ability of Japan as a whole to get things done will be put to the test, and at the Japanese Bankers Association, we intend to do everything in our power to tackle the challenges ahead, based on the principles of action I have outlined. I hope that all of you will continue to provide us with your collaboration and support going forward.
Thank you.