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Statement by the Governor

Concerning Sanyo Securities
(tentative translation)

November 3,1997
Bank of Japan

1. Sanyo Securities had drawn up and been implementing a restructuring plan since 1994, with the support of relevant financial institutions, for its affiliated non-bank entities which possessed a large amount of non-performing assets.

In such circumstances, we have today been informed by Sanyo Securities of the following:

"Sanyo Securities has been discussing with relevant parties on the ways to restore the Sanyo Securities Group, but has come to a conclusion that implementation of a further restructuring plan would be difficult and has decided to take legal measures for the affiliated entities. As a consequence, because of the resulting losses from the credit to these affiliates, it has become difficult for Sanyo Securities itself to continue ordinary business, and has judged that it would be appropriate to strive for reorganization following legal procedures. Thus, it has decided to suspend part of its business and to file today with the Tokyo District Court an application for the commencement of reorganization proceedings. It has also decided, in order to prevent losses to customers, to file an application for the issuance of an order of preservative measures which would fully ensure the returning of customer property."

We have also been informed that the management of Sanyo Securities will resign in order to clarify managerial responsibility.

2. In response to the application, the Tokyo District Court has issued an order of preservative measures but the order excludes from the prohibited activities certain activities including the returning of customer property. We have been informed that customer property, including cash from customers, will be protected and that they will be returned swiftly through the support and cooperation of the relevant parties including the Securities Deposit Compensation Fund and the main banks. Thus, we would strongly expect that investors react calmly.

3. The Bank of Japan acknowledges that it is crucial to protect investors and ensure the stability of securities market through the efforts by the relevant parties for the maintenance of the confidence in the Japanese financial system at home and abroad.