Makoto Takashima, Chairman
Japanese Bankers Association

Chairman’s Inaugural Address

 I am Takashima of Sumitomo Mitsui Banking Corporation and I am taking over as the chairman of the JBA from Mr. Fujiwara.
 The Heisei era is coming to an end and we are entering a new era, which, as we learned today, is Reiwa. I feel the weight of responsibility of serving as the JBA’s chairman at such a turning point in history. I am committed to fulfilling my duties over the year and would like to ask for your cooperation and support.
 Before I move on to talk about my resolution as the chairman, I would like to take this opportunity to express my sincere gratitude to the former chairman, Mr. Fujiwara.
 Last year, a series of large-scale natural disasters caused enormous damages and exposed infrastructure vulnerabilities. Outside Japan, global economic uncertainty has further increased as trade conflicts between the U.S. and China aggravated, Brexit talks remained in deadlock, and Chinese economy slowed down.
 In such difficult times, Mr. Fujiwara exercised wonderful leadership in steering the banking industry to address a wide range of social challenges, such as responding to natural disasters, promoting SDGs initiatives, preparing for the FATF's fourth round of mutual evaluation of Japan, and combatting financial crimes. Again, I would like to express my utmost respect and gratitude for his hard work and dedication.

 Now, looking at the current business environment surrounding Japan’s banking industry, first of all, the global economy is expected to continue growing at a steady pace. Meanwhile, the ongoing US-China hegemonic rivalry will likely continue, even if the two countries reach an agreement on certain trade issues. In Europe, the outlook for Brexit talks remains extremely uncertain, even though the departure date was pushed back. We also need to keep a close eye on the overall Chinese economy with its debt problems and the risk of rapid downturn.
 Amid such external factors, the Japanese economy, until recently, has maintained its moderate recovery trend against a backdrop of increasing corporate profits, improving employment and income, and recovering investment sentiment. Recently, however, it is slowing down, affected by declines in export and production stemming from overseas economic slowdown. Furthermore, the assessment of the Indexes of Business Conditions for January has been downgraded from the previous month’s “weakening” to “signaling a possible turning point.” Moreover, the Bank of Japan’s March TANKAN released this morning indicates that business sentiment as a whole is deteriorating. I believe that we must remain vigilant, and also be watchful of uncertain external factors.
 In addition, during the three years since the Bank of Japan introduced its negative interest rate policy, decline in loan-deposit spread and difficulty investing in a low-interest rate environment have exacerbated, and we are starting to see their negative effects on the business performance of some financial institutions.

 With the aforementioned business environment in mind, I would like to make this fiscal year one that contributes to the resolution of economic and social issues of the new era.
 We are at the dawn of a new era, whose name Reiwa was just announced today. Throughout this year, we are anticipating various events, including the new Emperor’s accession, transition to a new era and a ten-day holiday period to celebrate these events; the G20 Osaka Summit chaired by Japan; and the planned consumption tax hike and the FATF’s fourth round of mutual evaluation of Japan in the autumn.
 Furthermore, the Financial System Council is discussing the establishment of a function-based and cross-sectoral financial regulatory regime. It is imperative that the JBA addresses each of these issues with utmost care. With that in mind, we are planning our activities of this fiscal year around three pillar initiatives.

 The first-pillar initiative is to work towards solving economic and social issues.
One such example is enhancing how we support foreign migrant workers, in light of the revised Immigration Control and Refugee Recognition Act that has just come into effect today. I believe we as the banking industry need to do what we can to make life easier for foreign migrants in Japan.
 Another example is preparations in anticipation of transition to a new era and the ten-day holiday period. We are making every effort for continuity of the Zengin System, and we are also cautioning member banks to keep ATMs and night safes operational. In addition, we intend to provide SME clients with appropriate advice on their financing over the holiday period.
 As for the planned consumption tax hike scheduled for October this year, various measures are expected to be taken against its negative effects on the economy. I believe that the banking industry must also fulfill its role in this, in areas such as point redemption in cashless payments.
 Furthermore, needless to say, one of Japan’s most serious structural problems is the aging population. The Financial System Council and other bodies have been contemplating how financial services should adapt to an aging society. It is also on the agenda of this year’s G20 Finance Ministers and Central Bank Governors Meeting. We, as the banking industry, are addressing this by, for example, encouraging young and working generations to save and accumulate wealth in a stable manner; facilitating smooth business succession of SMEs; creating an environment where the elderly and their families can reliably and effectively use their assets; and working on issues related to clients suffering from dementia.
 Moreover, we will continue to work hard on other issues, including playing our role in recovery and reconstruction from earthquake damage, responding to emergencies such as natural disasters, and actively engaging in financial and economic education initiatives to further improve financial literacy across generations. Through these efforts, we intend to contribute to Japan’s sustainable economic growth.

 The second-pillar initiative is to build a safe and secure financial infrastructure utilizing digital technology.
 Financial infrastructure is at the foundation of the society and the economy, and at the same time is built upon the trust of the people. I believe that, naturally, the source of that trust lies in safety and security.
 Our mission here as the banking industry is to continue to ensure such safety and security that underlies the trust we have built over the years, and then to accelerate various initiatives aimed at enhancing convenience.
 From this perspective, in addition to ongoing Fintech initiatives promoted by member banks, the JBA would need to work further on enhancing settlement processes, such as transitioning to a cashless society, and promoting open API and XML messaging.
 While a variety of players have been entering financial service markets by capitalizing on digital technology, establishing a safe and secure transactional environment is a key issue common to all players. At present, the Study Group on the Financial System under the Financial System Council is discussing the development of a function-based and cross-sectoral regulatory framework. We, as the banking industry, intend to continue to contribute actively and proactively to such discussions.
 In addition, the My Number System is expected to further its position going forward as one of the key infrastructures in the digital society. The banking industry intends to facilitate the wider use of the My Number System in cooperation with the government and other relevant ministries and agencies.

 The third-pillar initiative is to maintain and enhance the trustworthiness and soundness of the financial system.
 Despite of recent concerns over a slowdown and unwinding of globalization, my view is that the globalization of financial services is a major and irreversible trend. Therefore, Japan’s financial system must ensure global-standard trustworthiness and soundness, and I believe that we are expected to make sustained efforts to this end.
 First, with regards to international financial regulatory reforms, Basel III has been finalized, but its implementation at national levels and its cumulative effects are yet to be assessed. In addition, addressing market fragmentation resulting from jurisdiction-specific regulations has become a major issue. These are on the G20 agenda this year. We, as the banking industry, will be following their discussions with a keen interest.
  Next, with regards to AML/CFT measures that are becoming increasingly demanding worldwide, the fourth on-site review by the FATF is scheduled for this autumn. It goes without saying that completing the FATF review process is not by itself the goal. As a responsible member of the international community, we need to continue with our initiatives to enhance AML/CFT, and will actively engage in public relations and awareness-raising activities to gain the understanding of our customers.
 Special fraud cases, such as money transfer scams, have remained at a high level both in the number of cases and in value. In order to prevent such crimes and avoid the spread of damage, the entire banking sector will work on sharing knowledge of and raising awareness on their modus operandi and effective countermeasures
 Also a significant challenge is addressing the discontinuation of LIBOR that is expected at the end of 2021. Given its significant potential impact on financial markets and market participants, this issue should be addressed carefully and consistently across jurisdictions and currencies as much as practical. We intend to actively participate in such discussions.
 In addition, we will continue promoting issues such as enhancing cyber security, strengthening corporate governance, improving the Zengin System’s convenience, and actively engaging in public financial reform initiatives.

 Japan faces numerous economic and social challenges, including those I have just mentioned, and none of them can be avoided.
 The JBA is not only an industry association but also an organization that plays an important part of the financial infrastructure, such as running the Zengin System. In recent years, the boundaries of financial services have been expanding, as evidenced by the advancement of unbundling in finance and a series of entries by players from different industries. Under such circumstances, I believe that the JBA, as a body that forms the foundation of Japan’s financial system, is responsible for leading a broad coordination across the financial industry and for responding to social issues in a concerted manner in cooperation with the financial industry. As Japan moves on to the first year of the Reiwa era from the Heisei era, we intend to dedicate our efforts to resolving a wide range of economic and social issues.