Financial Sector

September 2006

Banks Call For Downsizing Postal Savings Bank
The Japanese Bankers Association on Thursday called for downsizing the planned postal savings bank before it expands its range of financial services. The JBA made the request to the Postal Services Privatization Committee, a government advisory panel considering how to proceed with the privatization starting in October 2007. The postal savings bank, one of the four firms to take over postal services under a holding company upon the privatization, is expected to have some 195 trillion yen in deposits, nearly two times as much as those at the Bank of Tokyo-Mitsubishi UFJ, the world's largest commercial bank in terms of assets. If the postal savings bank with such vast deposits expands its range of financial services while remaining under government control, it may amount to bloating of the public sector, the JBA said.
The JBA asked the panel to make a plan to lead the postal savings bank to enter the private sector while cutting its size. The Regional Banks Association of Japan told the panel the postal savings bank's new services or the raising or elimination of a savings cap should not be approved until the privatization is completed with the holding firm selling all shares in the bank within 10 years from October 2007. The postal savings bank is expected to seek to launch new services such as small business and housing loans, and to raise or eliminate the cap now at 10 million yen per depositor. The Second Association of Regional Banks complained about embezzlement and other scandals regarding postal savings and urged that the postal savings bank develop an internal control system that should be as tough as required for a commercial bank. (Kyodo News, September 21, 2006)