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Japan banks need to improve management-BOJ Hayami

TOKYO: Bank of Japan Governor Masaru Hayami expressed hope on Wednesday that the wave of consolidation in the banking sector will revitalise the industry, while calling for further improvement in the management of financial institutions.

"It is strongly hoped that the recent developments (in the financial sector) stimulate their competitive dynamism and promote the revitalisation and efficiency of the financial system," Hayami told a central bank panel on Japan's savings system.

Nearly all of Japan's nine largest banks with nationwide branch networks have moved to consolidate. All are still saddled with problem loans left over from the burst of the asset bubble nearly a decade ago.

In the latest development, Sanwa Bank Ltd, Asahi Bank Ltd and Tokai Bank Ltd said last week that they will merge under a joint holding company in April 2001, creating the world's third-largest bank group with assets of 103.7 trillion yen.

Three other major banks Dai-Ichi Kangyo Bank Ltd, Fuji Bank Ltd and Industrial Bank of Japan Ltd announced in October plans to merge, forming the world's largest bank group with assets of 135 trillion yen.

Hayami cautioned, however, that more work was needed.

"The most important thing is that the financial institutions not lose the trust of the public while they continue to recover. In order to do this, they must make further efforts to improve management," he said.

On monetary policy, Hayami said the supply of goods still exceeded demand, exerting downward pressures on prices, and this needed to be monitored closely.

"Based on this judgment, we are continuing our current policy of keeping (short-term) interest rates at zero percent," he said. -Reuters