JCP proposes measures to save credit unions

In Japan, 53 regional credit unions and banks went out of business in about one year since January 2001 as a result of overly strict inspections by the Financial Services Agency.

Taking this as a serious matter that affects small- and medium-sized businesses, the Japanese Communist Party has proposed that the government take three steps to save those financial institutions.

Announcing the proposal at a news conference on February 28, JCP Executive Committee Chair Shii Kazuo denounced the Financial Services Agency for carrying out stringent inspections that are detrimental to regional economies.

"The government policy of accelerating write-offs of non-performing loans is to blame for the bankruptcies," Shii said.

The government is pressing major banks to become more aggressive in the collection of their loans to small- and medium-sized businesses. It calls on the FSA to drive local credit unions, the financial mainstay for these businesses, into bankruptcy.

As steps to help credit unions get out of this situation, Shii demanded that the government: (1) publish information on the details of FSA inspections of all 53 failed credit unions, particularly information on trustee members to look after the failed credit unions; (2) end the present inspections which are based on financial inspection manuals which place credit unions on the same footing as major banks and redo inspections based on norms appropriate to credit unions whose objectives are not profit-making; and (3) protect funds invested in the failed credit unions.

Funabashi Credit Bank which went bankrupt in January is a typical example of the FSA dirty maneuvers. Unusually, the FSA refused to accept the experts' appraisal of mortgaged land value and insisted to accept only 90 percent of the value. The imposition of low appraisal was a major cause of the credit union becoming debt-ridden, because the credit union was obliged to increase their mortgages.

The other dubious point is that two employees of the Tokyo Higashi Credit Union, a successor to Funabashi Credit Union, were among the assistants in the liquidation trustees group. This means that the buyer was mixed up with the seller who should defend the value of their credits. Shii said that these developments suggest that the FSA drove Funabashi Credit Union into bankruptcy and let Tokyo Higashi Credit Union carry it over. (end)