Aso considers full protection of bank deposits

Written by Writer on Tuesday, October 14th, 2008

Aso considers full protection of bank deposits

Prime Minister Taro Aso instructed Finance Minister Shoichi Nakagawa on Monday to consider protecting deposits fully in case of bank bankruptcy to help ease depositors’ concerns amid the global financial crisis, government officials said.

Aso also told Nakagawa, who just returned from a meeting of Group of Seven financial chiefs in Washington, to consider reviving a law to inject public funds into capital bases of regional banks, they said.

Before meeting with Aso at the headquarters of the ruling Liberal Democratic Party, Nakagawa told reporters, “I believe Japan’s (financial) system is sound but I will take everything into account.”

For deposits other than current and other deposits for fund settlements, principal of no more than 10 million yen and its interest are currently protected per depositor at each financial institution. The portion in excess of that amount is paid based on the asset status of the failed financial institution.

The fund-injection law, meanwhile, became effective on Aug. 1, 2004, as temporary legislation and the period of application for public funds for financial institutions under the law expired on March 31 this year.

An action plan announced by G7 finance ministers and central bank governors at their meeting Friday called for strengthening the deposit insurance system of each country. The G7 groups Britain, Canada, France, Germany, Italy, Japan and the United States.