Takashi Oyamada, Chairman
Japanese Bankers Association

Chairman’s Inaugural Address

 I am Takashi Oyamada, and on this occasion of the board of directors meeting, I am honored to accept the baton from my predecessor, Mr. Kunibe and assume the position of chairman of the Japanese Bankers Association. Over the next year, I will strive to fulfill my duties with the support of everyone.

 Before stating my three pillars for the next one year, I would like to take this opportunity to express my gratitude for my predecessor, Mr. Kunibe. Looking back, during the past year, existing systems and structures around the world have continued to undergo major changes. In such a year of upheaval, Mr. Kunibe has demonstrated remarkable leadership in response to a wide range of issues across the banking sector, including consideration on how to reform Japanese payment systems and ongoing initiatives to recover from earthquake disasters, in order to promote sustainable growth of Japanese economy. During his year as chairman, as he promised at his Inaugural Address, he has truly propelled the banking sector forward by supporting Japanese economy to overcome deflation and recover. I would like to express my profound admiration and appreciation for his efforts.

 Moving on, let us now consider the environment surrounding the banking sector in Japan in terms of domestic and international economy, politics, and financial systems. While the global economy continues to grow gradually, emerging economies have been decelerating and international trade activities are still weak, resulting in preventing further growth. Given the events such as Brexit, the Trump administration, the political climate and economic policy in Europe, where further presidential elections are approaching, as well as the situation in China whose economy remains in a downturn, it is possible that global money flow would change significantly.

 Domestically, Japanese economy has been on a gradual growth trajectory, demonstrated by the positive real GDP growth rate recorded in the past four quarters. On the other hand, as the primary balance remains in the red, the government is expected to pursue initiatives, such as expenditure reform to improve fiscal conditions, and implement a growth strategy that includes introducing new policies and easing existing regulations.

 I believe the banking sector must play an even greater role in supporting economic growth by contributing to the government’s growth strategy and addressing various structural changes.

 Despite the recent domestic and global uncertainty and instability, Japanese banking sector has remained relatively sound even after the global financial crisis. This robustness and adaptability might be considered strengths of our industry. By leveraging these strengths, I believe we must proactively fulfill our role as the bloodstream of the economy and support real economy.

 Based on my above view on the environment, I would like to make this fiscal year “a year in which we contribute to the sustainable growth of Japan and implement initiatives to adapt ourselves to various changes”. Specifically, we would like to maximize our contributions for the following “three pillars”.  

 The first pillar is “enhancing our contribution to Japan’s economic growth strategy.” Japanese economy is progressing steadily and overcoming deflation. However, it is essential for further progress to establish a virtuous economic cycle. To realize this, we will work on initiatives for stable asset accumulation. To put it another way, in order to accelerate the “shift from savings to asset accumulation”, we will pursue initiatives that will increase the supply of funds, which is expected to lead to economic growth. For example, we will actively promote the products and services, including the existing NISA scheme, new NISA scheme to be introduced in January 2018 and individual-type defined contribution (iDeCo) pension plans, so that our customers would be encouraged to work on long-term and stable asset accumulation.

 Furthermore, in order to generate a funds flow that will contribute to sustainable economic growth and long-term, stable asset accumulation of the household sector, each financial institution is much more required than before to establish and implement customer-oriented business management. The banking sector will accelerate the actions to improve the level of compliance in its fiduciary duty, with each of our member banks playing a key role. In addition, we will contribute to customers’ growth by enhancing our function as financial intermediaries. Exercising high-quality financial intermediary functions is a key duty of financial institutions. It is vital that our member banks continue to provide funding by focusing on their client’s business itself and its growth potential, without relying excessively on collateral and guarantees.

 We, the banking sector, will develop and improve our capability to evaluate client’s business and promote loans based on business assessments, such as technology or growth potential. At the same time, through collaborating with external organizations, we will share the value with our customers and provide further consulting services to resolve client’s issues. I believe that these initiatives will contribute to revitalization as well as stimulation of local economies.

 With regard to corporate governance reform, while we financial institutions have already been working on it, we will continuously review our governance and management framework based on the discussion about Stewardship Code with the aim of further improvement.

 We continue to work on recovery from earthquakes and other natural disasters. Post-earthquake reconstruction is indispensable to the sustainable growth of Japanese economy, and we are continuing to support recovery and restoration for those affected by the Great East Japan Earthquake, Kumamoto earthquakes and other natural disasters. We have now established the organization to oversee the guidelines for out-of-court settlements for a natural disaster relating to debt adjustment for affected victims, and we plan to apply these guidelines in an appropriate manner going forward as well.

 The second pillar is “developing and enhancing convenient, reliable, and secure financial infrastructure incorporating IT innovations.” The financial infrastructure of banks plays an essential role in supporting customers’ financial activities, and to date, it has carried out its function with a high level of security in Japan. In recent times, because of the rapid development of IT, including the emergence of so-called FinTech, which combines finance and technology, the banking industry and the environment surrounding our markets have been undergoing significant changes. Over the past year in particular, the Financial System Council and so on have been discussing changes in regulation to improve convenience for customers, and we have been participating in those discussions. During the coming fiscal year, we expect to take more specific steps aiming at improvement of our clients’ convenience and implementation of customer-oriented business management.

 For example, as an initiative to enhance Japanese payment systems, a new system will be developed to enable the transition to XML messaging during 2018, and we will promote nation-wide collaboration among related ministries, agencies, and industries so that XML will be smoothly introduced. Various initiatives, which would contribute to innovation in the financial sector, will also be steadily taken step-by-step, such as working on open APIs and considering the use of cutting-edge technologies, including Blockchain technology.

 Efforts to improve financial infrastructure such as Zengin System and densai.net will also be made. Zengin System is expected to launch 24/7 year-round service in the second half of 2018. Meanwhile, with the aim of promoting densai.net, further consideration will be given to improvements in user convenience, such as enabling Electronic Monetary Claim Recording Institutions to connect with one another.

 At the same time, in order to ensure the security and reliability of financial infrastructure, the banking sector will continue to devote energy to measures for tackling financial crimes, such as eradicating bank transfer fraud, so called “furikome sagi” and blocking activities connected with anti-social forces. Furthermore, in order to enable stable, long-term asset accumulation, we will secure customers’ interests by engaging in financial education to improve financial literacy and adapting services to accommodate demand from the aging population. We will also fulfill our role as part of the social infrastructure, such as the preparation for linking bank accounts with individual numbers so called “My Numbers” and issuing notices to the owners of inactive accounts.

 Finally, the third pillar is “maintaining and developing a fair, robust financial system.” Stable financial system is imperative in order for financial institutions to properly fulfill their function as financial intermediaries and support customers’ activities. While Japan’s financial system has maintained a high level of stability thus far, we will take appropriate actions for further improvement of the following items.

 First item is international financial regulations. Due to the impact from the international political climate, there is increasing uncertainty surrounding the future schedule for revision of Basel III, which has entered into the final stage. We will continue to appropriately collaborate with the relevant authorities and provide opinions as required, in order to achieve a fair, transparent and competitive environment and facilitate growth in Japan.

 Second item is TIBOR. We will properly implement reforms for offering a more transparent index and develop financial system that will be trusted both domestically and internationally.

 Finally, as I mentioned previously, this will be “a year in which we contribute to the sustainable growth of Japan and implement initiatives to adapt ourselves to various changes.” The role of banks is truly to keep the economy’s bloodstream flowing. Banks assume a role in supporting both individuals and companies by working closely at every stage of their life or growth and dealing with them honestly. At this critical timing when our capability to leap for growthis being tested, the banking sector must remain aware of its mission to contribute to both Japanese and global economy and do the utmost to fulfill its duties to support their expansion. In addition to financial intermediation, I believe we must play a role in passing on Japan’s business and technological capabilities, which are underpinning economic growth, to the next generation and furthermore supporting further expansion. In this unpredictable time, the banking sector needs to seize chances to generate new growth, remain fully committed to its mission, and move steadfastly forward at the leading edge of change.

 Assuming the position as chairman of the Japanese Bankers Association today, I would like to achieve sustainable growth in Japan for the next year, while seeking the opinions from various stakeholders and asking for their support and cooperation. I look forward to working with you all.

Thank you.