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Gov't plans to raise refund limit for merged banks for 2 yrs+.

TOKYO, Aug. 29 Kyodo

The government plans to raise the limit on its full-refund guarantee on deposits for merged regional financial institutions for up to two years as an incentive to promote mergers and consolidation, Financial Services Agency (FSA) officials said Thursday.

They said the 10 million yen limit would be increased according to the number of institutions to be merged.

If two banks unite, the limit would be 20 million yen, while the limit for five merged institutions would be 50 million yen, they said.

The FSA announced its intention to raise the refund cap for merged institutions in a report of proposals aimed at encouraging regional institutions to consolidate and merge.

It is hoping for improved profitability and strengthened financial standing among them ahead of the planned imposition of the limit on the government's refund guarantee on almost all types of deposits next April.

On April 1 this year, the government imposed a cap of 10 million yen per bank per depositor on time deposits it will reimburse in the event of a bank failure under its deposit insurance system.

The government plans to impose a similar cap on ordinary deposits and other types of liquid bank savings starting April 1, 2003, although it is considering exempting checking accounts and a proposed new type of settlement account to ensure the stability of financial settlements.

Encouraging consolidation among regional financial institutions is in line with the government's basic economic and fiscal policy adopted in June, which calls for promoting mergers of financial institutions to ensure the stability of Japan's financial system.

The report also calls for injecting public money into merged regional financial institutions to boost their capital bases.

Public funds will be injected upon applications from merged institutions, and the FSA will attach conditions such as requiring institutions submit management-improvement plans in return for public money, the agency officials said.

They added the FSA will also call for merged banks to make their own efforts to boost their capital bases.

The FSA plans would include a 1 trillion yen allocation request for the fiscal 2003 budget for the injection of public money.

The agency is also considering simplifying procedures to promote mergers and consolidation, the officials said.
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Publication:Japan Weekly Monitor
Date:Sep 2, 2002
Words:369
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