Oct.14.2005

Japanese Bankers Association

Chairman's Comments on the Enactment of the Postal Privatization Law

On October 14, the Laws concerning the Privatization of Japan Post passed the Diet. The JBA Chairman issued the following comments on the same day.

We, the private financial institutions, have maintained that the essential problem of the Postal Savings lies in that it distorts fair price formation in the Japanese financial markets and hampers efficient distribution of funds by sequestering the enormous amount of funds under its control from the markets.

The new Law abolishes the governmental guarantee on saving accounts with the Postal Savings Bank (PSB) when it starts as a private company in October 2007, as a means to ensure a level playing field with other financial institutions. At the same time, PSB will be required to pay the deposit insurance premium and taxes. Moreover, the Law also stipulates that the new accounts of PSB must be accounted for separately from the heritage accounts. The Holding Company must also dispose all PSB stocks it holds to ensure risks are blocked properly. These are positive big steps forward to solve the existing problems.

However, there is concern that problems will continue to be aggravated if PSB is allowed, under the present unfair competitive conditions, to expand its business freely in the transitional period that continues until ultimate privatization in 2017. Therefore, it is very important that the Privatization Commission functions properly in checking PSB's business expansion during the transitional period. We request that the opinion of private financial institutions and those of neutral third parties be reflected in the decision-making of the Privatization Commission.