The Tokyo Metropolitan Government will set up a third-party panel to scrutinize the management of banks that hold local government funds, metro government officials said Thursday.
The public funds management panel, consisting of economists and financial experts, will be launched by April, when the so-called pay "off" scheme, or a limited protection of deposits, will replace the current full protection, the officials said.
The scheme will guarantee repayment of up to 10 million yen worth of a deposit and its interest per depositor in the event of a bank's failure.
The panel will be the first to be launched by a local government on a full-time basis.
The metropolitan government has already set up an internal committee to study the management of public funds amid growing concerns over banks' financial health.
By the end of January, the committee will draw up a set of standards, including banks' capital-to-asset ratios and share prices, to be used when scrutinizing banks.
If a bank fails to clear those standards, the panel will hold a hearing and collect more detailed information about the bank's management, the officials said.
Should the panel conclude that the bank's condition is too risky, the metropolitan government may withdraw its money, they said.
Tokyo's annual budget for fiscal 2000 totaled 12.15 trillion yen, of which 1.19 trillion yen was deposited with 20 financial institutions.
However, when the central government lifts the temporary freeze on the scheme in April, such public funds just like any other deposits held by individuals or companies will be subject to only limited protection.