Summary of Remarks by the Governor
Resolving the nonperforming-loan problem of Japanese financial institutions, as well as restoring the health and stability of the financial system, is a most urgent task in ensuring the recovery of Japan's real economy. We are determined to tackle this problem as promptly as possible.
Measures to be taken should be consistent with the underlying principles of the Japanese Big Bang. In other words, measures should be free, fair, and global.
This would require further enhancements in information disclosure. Efforts are already being made in this field. For example, financial institutions started disclosing, as of end-March 1998, information pertaining to nonperforming loans in a manner consistent with standards set by the U.S. Securities and Exchange Commission. Another possible step would be voluntary disclosure of information concerning the results of self-assessments. In fact, some banks have already started making partial disclosures of their self-assessment results.
The extent to which banks disclose such results is, of course, to be decided by individual institutions. However, the Bank of Japan hopes that such steps will further encourage the disclosure of nonperforming loans in general. This will in turn facilitate the disposal of nonperforming loans and thus provide clear prospects for reestablishing market confidence and revitalizing the financial system.
Much progress has been made in the disposal of nonperforming loans by way of provisioning and write-offs. The next step is to remove them from the balance sheet, thereby improving cash flow.
Full disclosure is the underlying principle of the Bank in facing these challenges. Moreover, full disclosure could form a basis for the "Overall Strategy for Revitalizing the Japanese Financial System," which is being discussed by the government and the ruling party.