The Deposit Insurance Corporation of Japan (the DICJ) undertakes the following main operations to achieve the objectives of the law:
1.Deposit Insurance Operation
| (1) |
Collection of insurance premiums
The DICJ collects insurance premiums from insured financial institutions for the operations of the deposit insurance system. The insurance premiums to be paid by the insured financial institutions are calculated by multiplying the average balance of deposits and other claims by insurance premium rates which are determined by the DICJ’s Policy Board and approved by the Commissioner of the Financial Services Agency and the Minister of Finance.
|
| (2) |
Enhancement of depositors’ name-based aggregation database
The Deposit Insurance Act requires the insured financial institutions continuously keep depositor data and systems in good order so that they can provide them to the DICJ without delay in the event of failure.
The DICJ requires each financial institution to submit its name-based aggregation database in order to support their maintenance of depositor data and systems. The DICJ uses its own system to check whether the database conforms to the designated format and provides trainings and suggestions to financial institutions.
|
| (3) |
Insurance payment and provisional payment (limited coverage)
The amounts of insurance coverage provided to depositors are: 1) the entire amount for the deposits falling under the category of deposits for payment and settlement purposes (those meeting three requirements: bearing no interest, payable on demand, and capable of providing payment and settlement services); and, 2) up to ¥10 million in principal plus accrued interest until the day of failure per depositor per financial institution for deposits, etc. falling under other categories (general deposits, etc.) when an insurable contingency has occurred (such as the suspension of the repayment of deposits, etc. by a financial institution).
If it is anticipated that insurance payments will not be made for a considerable length of time, provisional payments may be made to cover the immediate living expenses and other costs of depositors of the failed financial institution based on depositors’ requests. Provisional payments are made against the balance of ordinary deposits (principal only) of each depositor, up to a limit of ¥600,000 per account.
|
| (4) |
Financial assistance to assuming financial institutions
The DICJ may extend financial assistance to an assuming financial institution and/ or a bank holding company that purchases assets and assumes liabilities of or merges with a failed financial institution in order to facilitate the transaction. The financial assistance may take the form of a monetary grant, loan or deposit of funds, purchase of assets, guarantee or assumption of debts, subscription for preferred shares and other capital-raising instruments, or loss sharing.
In case of a partial transfer of business or a transfer of insured deposits of failed financial institutions, the DICJ can provide financial assistance to the failed financial institution in order to ensure equitable treatment among creditors.
Additional financial assistance can be provided, if necessary, in response to the applications from the assuming financial institution and/or bank holding company.
When the assuming financial institution and/or bank holding company asks the DICJ to subscribe for their preferred shares and other capital-raising instruments, it needs to submit a plan to ensure its financial health.
|
| (5) |
PR activities related to deposit insurance system and DICJ operations
The DICJ strives to conduct easy-to-understand public relations utilizing various media from the stand-point of depositors in order to ensure better understanding by depositors, etc. of the deposit insurance system and the DICJ’s role and operations.
|
2.Failure Resolution
| (1) |
Operations related to financial administrators
When the Commissioner of the Financial Services Agency recognizes that a financial institution is in such a situation as an excess of liabilities over assets, and issues “disposition ordering the management of business and property of a failed financial institution by a financial administration (disposition ordering management)”, the DICJ itself may be chosen as the financial administrator. When appointed as the financial administrator, the DICJ sends its staff to the financial institution under management to conduct operations on its behalf.
Key activities of the financial administrator are: 1) operation and management of a financial institution under management on behalf of the former management; 2) selection of assuming financial institutions and smooth transfer of the business; and, 3) pursuit of liabilities of former managers of a financial institution under management.
The DICJ keeps itself ready to take administrative procedures for failure resolution in anticipation of its possible appointment as the financial administrator. The DICJ also conducts periodic practical training in order to ensure appropriate failure resolution.
|
| (2) |
Purchase of deposits and other claims
When an insurable contingency occurs, the DICJ may purchase deposits and other claims exceeding the coverage by deposit insurance upon request by depositors and others at an amount (amount of the estimated proceeds payment) calculated by multiplying the exceeding amount by a rate (the estimated proceeds payment rate) determined by the DICJ (the estimated proceeds payment). However, this does not apply to deposits pledged as security.
The estimated proceeds payment rate is determined in light of the estimated amount of the bankruptcy dividends to be paid by the financial institution which had an insurable contingency, and other factors.
When the amount of funds which the DICJ has received as bankruptcy dividends or repayment exceeds the estimated proceeds payments to the depositors and others even after the expenses incurred in purchasing deposits and other claims is deducted, the DICJ additionally pays the surplus (final settlement payment).
|
| (3) |
Full coverage of deposits and special crisis management as measures to deal with a financial crisis
Provided that the Prime Minister recognizes that the maintenance of the stability of the financial system in Japan or in the region where the insured financial institution conducts its business could be severely hindered, the need to take the following measures can be approved after deliberation by the Financial Crisis Response Council: in cases where the insured financial institution is a failed or insolvent financial institution, the DICJ may provide financial assistance exceeding the insurance payment cost to an assuming financial institution (full protection of deposits and other claims); in cases where the insured financial institution is a failed financial institution that is an insolvent bank, the DICJ acquires all the shares of the insured bank (special crisis management).
The DICJ has so far placed the Ashikaga Bank under the special crisis management, acquiring all the shares of the bank. The special crisis management of the Ashikaga Bank came to an end in July 2008.
|
| (4) |
Measures for orderly resolution of assets and liabilities of financial institutions for the purpose of ensuring financial system stability
If the Prime Minister recognizes that there is a risk that serious disruptions could be caused to the financial market and other parts of the financial system in Japan and orders the management of business and property of a failed financial institution by the DICJ (disposition ordering specified management), the DICJ acquires the right to manage and dispose of its property and conducts operations related to measures for orderly resolution of assets and liabilities of financial institutions intended to ensure the stability of the financial system, including transfer of debts, etc. that are essential to stabilizing the financial system (orderly resolution of financial institution).
|
| |
|
3.Capital injection
| (1) |
Capital injection as a measure to deal with financial crisis
Provided that the Prime Minister recognizes that the maintenance of the stability of financial system in Japan or in the region where the insured financial institution conducts its business, the measure of subscription for shares and other capital-raising instruments by the DICJ to enhance capital adequacy of the financial institution can be authorized through the deliberation by the Financial Crisis Response Council. The DICJ implemented capital injection to Resona Bank, Ltd. in 2003 based on a measure against financial crisis. Resona Bank completed repayment of the public funds above in July 2014.
|
| (2) |
Capital injection as a measure for orderly resolution of assets and liabilities of financial institutions for the purpose of ensuring financial system stability
If the Prime Minister recognizes that there is a risk that serious disruptions could be caused to the financial market and other parts of the financial system in Japan and that a measure for orderly resolution of financial institution should be implemented, the DICJ can implement capital injections as a measure for orderly resolution of financial institution not only to banks but also to other financial institutions including securities companies and insurance companies.
|
4.Purchase of Non-performing loans/Pursuit of Liability
| (1) |
Recovery of assets obtained from failed financial institutions
The DICJ entrusts the purchase and recovery of assets from failed financial institutions to the Resolution and Collection Corporation (RCC) under the Deposit Insurance Act. The DICJ has also entrusted the purchase and recovery of assets from sound financial institutions to the RCC in order to stabilize and revitalize financial functions in Japan under the Financial Revitalization Act. The RCC makes an effort to collect and dispose of these purchased non-performing loans and to support corporate turnarounds. Having consultations with the RCC on debt recovery, the DICJ provides guidance and advice necessary for the execution of the RCC’s operations.
|
| (2) |
Asset investigation regarding malicious debtors
The DICJ provides guidance and advice to the RCC in order to support the recovery activities of non-performing loans of failed financial institutions which are transferred to the RCC, and especially strives to find the concealed assets of malicious debtors who try to evade the repayment obligation despite having sufficient financial capacity for the repayment by exercising the authority to conduct asset investigation which is granted to the DICJ based on laws.
The main asset investigation activities are examining financial institutions and conducting on-site investigations of debtors and the affiliate. Obstruction or refusal of investigation may result in the imposition of penalty.
This DICJ’s asset investigation could be used for recovery of claims of the RCC, and contributes to reducing public burden.
|
| (3) |
Pursuit of civil and criminal liabilities of former managers of failed financial institutions and other parties concerned
The DICJ itself as a financial administrator, etc. or in cooperation with the RCC, pursues the legal liability of former managers, etc, who led its failure. Also, the DICJ and the RCC file accusations and complaints to a malicious debtor who blocks the loan recovery operations and conceals assets.
|
5.Capital participation
| |
In order to enhance financial functions of financial institutions, the DICJ conducts capital participation by entrusting subscription for shares and other capital-raising instruments to the RCC.
In entrusting the operations of capital participation, the DICJ lends funds necessary for such operations to the RCC. Also, the DICJ conducts operations for the RCC to appropriately manage/dispose shares and other capital-raising instruments, for which the RCC subscribed so far, by authorizing the RCC to exercise voting and other rights as a shareholder or investor.
|
6.Financial Operations Assistance
| (1) |
Purchase and recovery of specified difficult recovery claims
Based on the Deposit Insurance Act, the DICJ was assigned responsibilities for the purchase and recovery of specified difficult recovery claims owned by financial institutions to stabilize the financial system as a whole by blocking financial institutions’ relationships with antisocial forces, etc. for the sake of ensuring sound finances at the financial institutions, and the DICJ entrusts these tasks to the RCC, a contracted bank of the DICJ.
|
| (2) |
Construction of Database and Inquiry System about Antisocial Forces
The DICJ provides financial institutions with information about antisocial forces in response to inquiries from these institutions as well as constructs a system to collect and archive such information.
|
| (3) |
Operation based on the Criminal Accounts Damage Recovery Act
Based on the Criminal Accounts Damage Recovery Act, the DICJ has been in charge of placing public notices related to the procedures for the payment of damage recovery benefits to the victims of criminal acts, such as bank transfer fraud, in which the criminal tricks persons into sending money to designated fraudulent deposit accounts.
|
| (4) |
Operations under the Dormant Deposits Utilization Act
The DICJ is preparing to receive dormant deposit transfer funds under the Act on Utilization of Dormant Deposits to Promote Public Interest Activities by the Private Sector (hereinafter referred to as the Dormant Deposits Utilization Act). |
7.Financial Operation
The DICJ runs its operations through nine accounts(notes).
The DICJ raises funds according to funding needs of each account, and carefully operate short-term investment of the fund which accumulates temporarily. Regarding the funding, the DICJ procures funds required for operation of resolving failed financial institutions and capital injection into financial institutions for the sake of stabilization of financial functions by issuance of the DICJ bonds or borrowings with government guarantee.
(Note)The General Account and Crisis Management Account were established under Deposit Insurance Act, the Financial Rehabilitation Account under Financial Rehabilitation Act, the Early Strengthening Account under Early Strengthening Act, the Financial Functions Strengthening Account under Financial Functions Strengthening Act, the Damage Recovery Distribution Account under the Criminal Accounts Damage Recovery Act, the Enterprise Turnaround Initiative Corporation Account under the Act on Enterprise Turnaround Initiative Corporation of Japan, the Great East Japan Earthquake Enterprise Turnaround Initiative Corporation Account under the Great East Japan Earthquake Enterprise Initiative Corporation Act, and the Dormant Deposits Management Account under Dormant Deposits Utilization Act.
8.International Activities
Against the background of recent global financial crisis, international recognition regarding stability of financial system and importance of development and management of deposit insurance system is increasing. Under such circumstances, continuous cooperation and collaboration among deposit insurers of various countries are very important for the stabilization of global financial system.
The DICJ participates in the formulation of international standards of deposit insurance, etc. and tracks international trends through participating in the International Association of Deposit Insurers, an international organization of deposit insurers, and holding international conferences.
Moreover, the DICJ sends specialists to provide technical assistance to Asian countries which are deeply related to our economy and financial aspects, and are considering to introduce or to develop deposit insurance system. The DICJ considers that these activities not only further improve our deposit insurance system but also lead to enhance the deposit insurance system of other countries through transferring our experience.
9.Research & Study Activities
The DICJ conducts research and studies on deposit insurance system at home and abroad, looking out for the situations of finance and economy extensively, in order to carefully consider the future of the deposit insurance system as a safety net aiming at depositor protection and stability of financial system.
