The leader of the nation's top banking association welcomed on Tuesday the government's intention to use public funds for future financial crises, describing the plan as a "safety valve" for contingencies that fall beyond the capacity of the existing system tasked with dealing with such problems.
Naotaka Saeki, chairman of the Federation of Bankers Associations of Japan, expressed support for the idea of offering government guarantees to Bank of Japan loans made to the Deposit Insurance Corp. The DIC, financed mainly by banks and credit associations, helps pay out deposits and offers aid to financial institutions that assume the operations of a failed bank.
Saeki's comments, made during a regularly scheduled news conference in Tokyo, effectively endorsed a statement Monday by Prime Minister Ryutaro Hashimoto, who told the Diet of his plan to use public money to reinforce the DIC. Saeki, also president of Sanwa Bank, said the proposed measure would be significant in erasing worries about the existing financial safety net, which includes the DIC.
But priority must be placed on protecting depositors and maintaining the financial system, not on rescuing collapsing institutions, he stressed.