2. Presented by 1.Tahniyat Sultana Prova 16-017 2.Tanvir Ahmed16-009 3.Morium Akhter16-002 4.Sanjida Islam Khan16-018 5.Md.Farhadul Islam16-066

3. TOPIC :  B ank Structure And Regulation In Japan

4. Background In the post-war period, Japan faced a severe shortage of capital and weak financial infrastructure. World-war II virtually wiped out the household sector’s financial assets. The priority of the US occupying force and the new Japanese government was to increase assets, which in turn could finance recovery of the real economy. In the post-war period, Japan faced a severe shortage of capital and weak financial infrastructure. World-war II virtually wiped out the household sector’s financial assets. The priority of the US occupying force and the new Japanese government was to increase assets, which in turn could finance recovery of the real economy.

5. Keiretsu: A group of companies with cross- shareholdings and shared directorships which will normally include a bank, trust company, insurance firm and major industrial concern such as steel, cars, property and construction. Under the keiretsu system: Domestic,foreign and short and long term financial transaction were kept separate Interest rates regulated Financial firms organised along functional lines.

6. Ministry of Finance ( MoF)  backed by the Bank of Japan  Was the key regulator  Used regulatory guidance to operate the financial system  three MoF bureaux: Banking,Securities and International Finance Responsibilities: Finanacial institution supervision:  Examination of financial firms  Control of interest rates and products offered by firms  Supervision of the deposit protection scheme  Setting the rules on activities to be undertaken by financial firms.

7. Bank of Japan was responsible for the implentation of monetary policy. MoF officials exercised strong influence through its membership on the Bank’s policy board. The Bank and MoF conducted on site inspectiuons of banks in alternatives. The Bank of Japan also acted as banker for aommercial banks and govermnent, regulated the interbank market and was consulted about regulatory issues, though the MoF took all final decision. was responsible for the implentation of monetary policy. MoF officials exercised strong influence through its membership on the Bank’s policy board. The Bank and MoF conducted on site inspectiuons of banks in alternatives. The Bank of Japan also acted as banker for aommercial banks and govermnent, regulated the interbank market and was consulted about regulatory issues, though the MoF took all final decision.

8. Banks for providing low interest loans to large industrial firms,were protected from foreign competitors and highly segmented markets limited domestic competitions. Until 1995 there was an implicit guarantee that virtually any financial firm getting into trouble would be protected – a 100% safety net. MoF officials were often given jobs by banks when they retired- evidence of the cosy relationship for MoF and regulated bankers. Banks for providing low interest loans to large industrial firms,were protected from foreign competitors and highly segmented markets limited domestic competitions. Until 1995 there was an implicit guarantee that virtually any financial firm getting into trouble would be protected – a 100% safety net. MoF officials were often given jobs by banks when they retired- evidence of the cosy relationship for MoF and regulated bankers.

9. Result of functional segmentation and restriction  excessive dependence on banking sector  60% of domestic corporates finance consisted of loans  Capital markets were underdeveloped  Low participation of foreign financial firms in Japanese markets  Made Token Gesture to avoide criticism  excessive dependence on banking sector  60% of domestic corporates finance consisted of loans  Capital markets were underdeveloped  Low participation of foreign financial firms in Japanese markets  Made Token Gesture to avoide criticism

10. Japan’s Big Bang 1996 Announced in Prime Minister Hashimito Announced by

11. Reasons behind set-up Big Bang Crash of Japan’s stock market Insolvency of Japanese Banks To revive the financial sector

12. Objectives of the program Restructure of financial sector Restore of financial stability

13. The package of reforms include three principles FreeFairGlobal

14. Reformation was established- To eliminate segmented markets characteristic To form of ‘Restricted Universal Banking’ To introduce Financial Holding Company To introduce with Global Expansion To create International Agreements

15. The Bank of Japan Act, 1998 indicates- A large degree of autonomy to the Bank of Japan Responsibility of price stability MOF acts as representator of Policy Board Examinator of conducts bank to the Bank of Japan

16. Activities of Finance Minister- Activities of Finance Minister Direct the Bank of Japan Ensure the yen’s stability Approve the bank’s budget Makes loans

17. Financial Service Agency FSA-  Formulates Policy  Regulates the financial sector  Establishing Creditability

18. Deposit Insurance commission of Japan (DICJ) DICJ is an operating agency to achieve the objective to protect depositors, among others and concerning the resolution of failures of financial institutions. The DICJ consists of 7 departments 35 divisions 4 offices, with a total of 402 staff DICJ is an operating agency to achieve the objective to protect depositors, among others and concerning the resolution of failures of financial institutions. The DICJ consists of 7 departments 35 divisions 4 offices, with a total of 402 staff

19. Deposit Insurance Commission of Japan Deposit Insurance Commission established in 1971 (DICJ) funding from the government main body that operates are the Bank of Japan, and private financial institutions The original capital of 450 million The government subsequently subscribed additional capital of 5 billion in July 1996 to administer work The current share of the Japanese government stands at around 95% of total capital.

20. Deposit Protection Scheme There are two methods of protecting deposits when a financial institution fails: 1. A method of transferring business to other sound financial institution and concurrently providing financial assistance 2. A method where the DICJ pays insurance proceeds directly to depositors There are two methods of protecting deposits when a financial institution fails: 1. A method of transferring business to other sound financial institution and concurrently providing financial assistance 2. A method where the DICJ pays insurance proceeds directly to depositors

21. Major activities of DICJ  Collection of insurance premium  Financial assistance  Purchase of deposit & other claims  Response to financial crisis  The operation of bridge bank  Subscription for shares of financial institution  Investigation & accusation of pursuit of managerial liability  Collection of insurance premium  Financial assistance  Purchase of deposit & other claims  Response to financial crisis  The operation of bridge bank  Subscription for shares of financial institution  Investigation & accusation of pursuit of managerial liability

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