JBA Submits Opinions on the View of the Postal Services Privatization Committee

On December 22, 2006, the Postal Services Privatization Committee solicited opinions on its "View concerning Deliberation of New Businesses of the Postal Savings Bank and Postal Insurance Company." JBA responded by submitting its opinion to the Committee’s secretariat on January 30.

JBA gave the following as general remarks in the opinion paper.

- The most important elements in promoting privatization are an efficient resource distribution based on market principles and reduction in the size of the bloated balance sheet.

- Prioritizing the expansion of the scope of businesses for an early public offering is mistaken. The urgent tasks facing the Postal Savings Bank are transforming it into a sound financial institution acceptable to the market by reducing its scale, realizing efficient management and overhauling its management system. A public offering should not take place until these matters are realized.

- There must be an active discussion on new businesses that may materially impact regions and markets prior to any decision to implement such. It is important to fully consider the spirit of the Law concerning Privatization of Japan Post.

The opinion paper also addresses the following main subjects?"impact of public offering and disposal of stocks," "abolition of the government guarantee and accompanying necessary measures," "ensuring appropriate competition" and "scale of the balance sheets for the two financial companies."

-If the Postal Savings Bank enters new businesses without attaining efficient management and remodeling the management system in a manner befitting a private institution, then it would not only fail to gain investor confidence but also wind up jeopardizing national interests.

- It is essential to keep endeavoring to eliminate the perception that a tacit government guarantee of deposits exists. At the same time, users' perceptions should be monitored to discern if they have been corrected when deliberating the bank's entry into a new business.

- We are concerned that the perceived tacit government guarantee may place other financial institutions in a competitive disadvantage to the Postal Savings Bank's fund raising and lending. Therefore, deliberation on these matters must be done prudently.

- The Postal Services Privatization Committee ought to encourage the Japan Post Group to draft business plans based on slimmer balance sheets.