Multiple Deposit Insurance Schemes in Japan April 9, 2013 IADI 2013 Research Conference "Evolution of the Deposit Insurance Framework: Design Features and Resolution Regimes Hiroyuki Obata Deputy Governor
Outline 1. Introduction: Two DISs in Japan 2. Scheme Comparison 3. Conclusions 2
1. Introduction: Two DISs in Japan 3
Two DISs in Japan Depositors Deposits Banks Credit Cooperatives DICJ Deposit Insurance Corporation of Japan Premium Deposit Insurance Deposits ( Savings )* Agricultural & Fishery Cooperatives AFCSIC The Agricultural and Fishery Co-operative Savings Insurance Corporation Premium * Deposits at Agricultural and Fishery Cooperatives are called savings.
Two DISs in Japan AFCSIC was established in 1973, following DICJ which was established in 1971. Savings at agricultural and fishery cooperatives (AFCs) are not covered by DICJ but covered by AFCSIC because... 1) Different risk profiles: AFCs provide not only credit (banking) business, but also other businesses such as mutual aid services for farmers/fishers. 2) Different depositor profiles: Most depositors at AFCs are members of the cooperatives. 5
2. Scheme Comparison 6
Member Deposit-Taking Institutions DICJ AFCSIC Banks Member Financial Institutions Number Member Deposit-Taking Cooperatives Number City Banks 6 Agricultural Cooperatives (only entities who conduct a credit business) 724 Regional Banks 64 Fishery Cooperatives (only entities who conduct a credit business) 153 Regional Banks Ⅱ 42 SHINREN for Agriculture (Credit Federation of Agricultural Cooperatives) 36 Trust Banks 18 SHINREN for Fishery (Credit Federation of Fisheries Cooperatives) 30 Others 16 The Norinchukin Bank 1 Sub-Total 146 Shinkin Banks 271 Credit Cooperatives 158 Labour Banks 13 Federations and others 4 Total 592 944 Note: Deposits at the Japan Post Bank have been covered by DICJ since it was privatized in 2007. 7
Size of Deposits in Japan Other Banks 18% DICJ Eligible Deposits JPY 866 trillion Shinkin Banks 14% Credit Cooperatives 2% Labor Banks 2% Federations and others 1% City Banks 28% AFCSIC Eligible Savings JPY 91.3 trillion Credit Federation of Agricultural Fishery Cooperatives Cooperatives 2% 1% Credit Federation of Fisheries Cooperatives 2% Norinchukin Bank 1% Regional Banks Ⅱ 7% Regional Banks 24% Agricultural Cooperatives 94% Trust Banks 4% 8
Agricultural Cooperatives? 9
Common Features of DICJ and AFCSIC Both DICJ and AFCSIC are equipped with the following functions Insurance Payout Financial Assistance Purchase & Recovery of Non-performing Loans Financial Administratorship On-site Inspections Exceptional Measures to Prevent Financial Crises 10
Organization DICJ Establishment July 1971 September 1973 AFCSIC Act Deposit Insurance Act (April 1971) Agricultural and Fishery Cooperation Savings Insurance Act (July 1973) Initial Paid-in Capital General Account JPY 450 million General Account JPY 300 million Supervising Authorities Number of Employees Government JPY 150 million Bank of Japan JPY 150 million Private Financial Institutions JPY 150 million Financial Services Agency, Ministry of Finance 366 (FY2011) 18 (FY2011) Government JPY 75 million Bank of Japan JPY 75 million Private Credit Cooperatives JPY 150 million Ministry of Agriculture, Forestry and Fisheries (MAFF), Financial Services Agency, Ministry of Finance 11
Membership, Coverage and Eligible Deposits DICJ AFCSIC Membership Compulsory same as at the left Coverage 10 million yen (approx. $105,263) in principal plus interest per depositor per financial institution for general deposits Full protection for deposits for payment and settlement purposes Eligible Deposits (Eligible Savings) General deposits (Ordinary deposits bearing interest, Time deposits, Installment savings, etc.) Deposits for payment and settlement purposes (Current deposits, Ordinary deposits bearing no interest, etc.) same as at the left same as at the left *All data is as of the end of FY 2011. Figures in US dollars are calculated based on US$1 = 95 yen 12
Funding Premium Rate (from FY2010 onward) Liability Reserves Eligible Deposits Back-Up Funding Deposits for payment and settlement purposes DICJ General deposits, etc. Effective Rate Deposits for payment and settlement purposes AFCSIC General deposits, etc. Effective Rate 0.107% 0.082% 0.084% 0.018% 0.014% 0.015% JPY 420.5 billion (approx. $4.43 billion) JPY 866 trillion (approx. $9.12 trillion) Borrowing/issuing bonds in the market with government guarantee Borrowing from the Bank of Japan JPY 317.3 billion (approx. $3.34 billion) JPY 91.3 trillion (approx. $961 billion) Borrowing from financial institutions with government guarantee same as at the left *All data is as of the end of FY 2011. Figures in US dollars are calculated based on US$1 = 95 yen 13
Resolution Number of resolution cases DICJ : 182 AFCSIC : 22 Total amount of financial assistance DICJ : JPY 25 trillion AFCSIC : JPY 106 billion JA, majority member of AFCSIC, has been promoting merger of agricultural cooperatives. FY1973 : 5,428 FY2011 : 724 Methods of deposit protection (DICJ and AFCSIC) 1) Insurance Payout 2) Financial Assistance (P&A) 14
3. Conclusions Important features of the two DISs in Japan (DICJ & AFCSIC): Same coverage level No competitive concern (pointed out in FSB s DIS peer review). No overlapping of member institutions Good practice for maintaining the efficiency of the entire deposit insurance system 15
3. Conclusions Public Awareness: Both DICJ and AFCSIC clearly inform depositors of the other DIS in their publications and websites. Decrease the possibility that depositors are confused in the event of failures. Cooperation: DICJ and AFCSIC maintain close communication through regular meetings and other channels. Close mutual cooperation is essential for the effectiveness of the entire deposit insurance system. 16
Thank you for your attention 17