JBA's Opinion on New Bank Envisaged by the Tokyo Metropolitan Government

On February 23, JBA published its position concerning Tokyo's plan to establish a new bank.In May 2003, the governor of Tokyo announced a plan to establish a new bank, and preparations are underway to open it as early as April 2005.JBA believes that establishing a new bank at the initiative of a local government runs counter to structural reforms that are based on the principles of transferring duties from the public sector to the private sector and letting the private sector handle matters it can handle. These are important points and JBA pointed out problems involved in the new bank initiative by having the Chairman issue comments in May and November 2003 that called for discretion.Nevertheless, Tokyo released its "Master Plan for a New Bank" on February 6 and submitted a budget (100 billion yen) for capitalizing the bank to the regular session of the Metropolitan Assembly that began on March 25. JBA felt driven to indicate its opposition to these steps this time by issuing the association's opinion (the entire text of JBA's opinion is on the JBA Website).The core point of the JBA opinion is that the plan to establish a new bank should be retracted. JBA contends that there is no point spending tax revenues to the tune of 100 billion yen on establishing a new bank whose targeted business niche is lending to small and medium-sized companies and other entities that are adequately served by private financial institutions. The new bank may also pose problems from viewpoint of the national economy.The JBA opinion paper raises three points specifically: (1) The contradiction between realizing policy objectives and securing sound management, (2) The fact that the step is counter to the aim of transferring duties from the from public sector to the private sector, and (3) Possibility of need to cover losses when operating losses and bankruptcy occur.JBA wants the Metropolitan Assembly to thoroughly study and deliberate the plan for the new bank.