Transcript The Roles and Functions of JDB

Development Bank of Japan
Prospects for the Development
Banking System—DBJ’s Case
At ALIDE Annual Conference 2001
Kazuyuki Mori
International Cooperation Department
Table of Contents
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





Consensus Views on DFI
Management
Establishment of DBJ—
Integration of JDB and NEF
Government Reform—
Background of the Integration
Main Objectives and Function
of DBJ
Loan and Investment Budget
for FY 2001
Changes in Major Areas of
DBJ Loans
Financial Sector Reform—
Background of New
Management









Financial Institutions in Japan
Policy-based Financial
Institutions in Japan
Former FILP System
Current FILP System
DBJ’s New Management
Ensuring Operational
Transparency and
Accountability
Maintenance of Financial
Soundness
Strengthening the Knowledge
Bank Function
Appropriate Action on Policy
Issues
1
Consensus Views on
DFI Management

Development Mission
• Not for profit maximization

Financing Higher Risk Areas
• Medium- to long-term finance
• Inadequate credit supply from the market

Financial Soundness
• Sustainability of the institution
• Low cost funds needed
• Stringent credit analysis

Autonomous Management
• Financial judgement over policy judgement
2
Establishment of DBJ
— Integration of JDB and NEF
JDB
NEF
DBJ
(as of March 1999)
(as of March 1999)
(as of March 2000)
Establishment
April 20, 1951
June 8,1956
October 1,1999
Law
The Japan Development Bank Law
North East Finance of Japan Law
The Development Bank of Japan Law
Mission
National Economic &
Regional Economic
Vitality of Economy, Better
Social Development
Development
Quality of Life, Autonomous
Regional Economy
Total Assets
17,951.3 billion yen
1,705.8 billion yen
19,581.2 billion yen
Paid-in Capital
689.6 billion yen
134.1 billon yen
976.3 billion yen
Number of Staff
1,100
287
1,387
3
Government Reform
—Background of the Integration

Continuous Government Reform
• 1981 - continuing
• 1996 Hashimoto
• 1997 Cabinet Decision on government institution reform

End of High Growth in Mid-1970s
• Oil crisis triggered inflation, recession and low growth stage
• Fiscal deficit

New Conservatism in 1980s
• Inflation, unemployment, fiscal deficit, trade deficit → Marketoriented approach by US & UK governments
• Political priority in Japan → Fiscal reform and government
reform
4
Main Objectives and Function of
DBJ

Main Objectives
• Enhancement of the vitality and sustainable development of
Japan’s economy and society
• Creation of a better quality of life for the nation’s citizens
• Development of self-reliant regional economies

Functions
• Money bank function
• Provision of medium- to long-term funds
• Knowledge bank function
• Assistance to projects important to national policy
• Dissemination of information and knowledge
5
Loan and Investment Budget for
FY 2001


Planned amount of investment and loans: 1,600 billion yen
New Development Policy for Rebirth of Japan: IT Promotion,
Environmental Protection, Aging Society, Business Recovery, and New
Business Development
Creation of Selfreliant Regions
Enhancement of
Quality of Life
Economic
Revitalization
（427.2 billion yen）
（883.0 billion yen）
（172.0 billion yen）
Development of regional
social infrastructure
Promotion of regional
industrial orientation
Environmental protection,
energy, disaster
preparedness and welfare
measures
Support for regional tieups and self-reliance
Transportation/distribution
networks
Economic structure
reform
Development of new
technology and business
Telecommunications
networks
6
Changes in Major Areas of DBJ Loans
(\billion)
1955 (56)
32
45
8
14
Coal
Mining
Ocean Shipping
1965 (237)
39
8
6
9
Development
of Technology
13
17
1985 (1,240)
6
9
12
13
7
30
9
8
Resources
and Energy
6
7
6
4
Resources
and Energy
11
NEF’s Regional Development
29
2
11
Others
38
Development of Telecommunications and
Technology
Information Network
Improvement of
Living Standards
14
NEF’s Regional Development
10
Improvement of
Living
Standards
Regional
Development
1995 (1,986)
26
Urban
Development
Ocean Shipping
Others 19
14
Regional
Development
1975 (873)
Others
Electric Power
Regional
Development
Coal
Mining
1
8
6
Improvement of Key
Internationalization Improvement of
Development of
Transportation System Regional
of Japan
Development Industrial Technology
Social Capital
1999 (1,555)
15
Enhancement of Quality
53
of Life
Economic Revitalization
Creation of Self-reliant
Regions
0%
20%
23
40%
60%
3
6
NEF’s Regional Development
80%
7
100%
Financial Sector Reform
—Background of New Management

End of High Growth in Mid-1970s
• Low investment demand
• From ‘savings shortage’ to ‘savings surplus’

End of Specialized Bank System
• Financial sector liberalization
• Collapse of long-term bank system
• Financial sector big bang

Change of FILP System
• Stable sources of funds for Japanese government institutions
• Market-based operation
8
Financial Institutions in Japan
Central Bank
Bank of Japan
Long-term Credit Banks (3)
Trust Banks (30)
Private Financial
Institutions
Ordinary Banks: City Banks (9)
Regional Banks (64+57)
Foreign Banks (84)
Credit Associations (386)
Credit Cooperatives (291)
Agricultural & Fishery Cooperatives (1,537)
Insurance Companies (46)
Securities Companies (228)
Policy-based
Financial Institutions
Banks (2) [DBJ & JBIC]
Government Finance Corporations (7)
Notes: Figures in parentheses denote the number of institutions as of the end of March 2000.
9
Policy-based Financial Institutions
in Japan
Institutions
New Loans
(100 million yen)
Loans Outstanding
(FY 2000 Budget)
(as of March 1999)
The Development Bank of Japan (DBJ)
22,300
191,831
Japan Bank for International Coorporation (JBIC)
27,490
218,482
The Export-Import Bank of Japan
－
118,656
The Overseas Economic Cooperation Fund
－
99,826
Japan Finance Corporation for Small Business
25,444
74,970
National Life Finance Corporation
47,860
107,540
120,392
721,450
4,300
42,056
20,601
214,188
2,434
17,546
270,821
1,588,063
Housing Loan Corporation
Agriculture, Forestry and Fisheries Finance Corporation
Japan Finance Corporation for Municipal Enterprises
Okinawa Development Finance Corporation
Total
10
Former FILP System
Postal Savings
Selfmanagement
Compulsory
Deposit
Selfmanagement
Pension Premium
（Welfare/National）
Surplus of
Special
Accounts
Compulsory
Deposit
Trust
Fund
Bureau
Loans
Government
Institutions
Compulsory
Deposit
11
Current FILP System
Since April 2001
FILP Institution
Bonds
Postal
Savings
Selfmanagement
Gov. Guaranteed
Bonds
Capital
Market
FILP
Pension
Premium
Selfmanagement
Surplus of
Special
Accounts
Bonds
Compulsory
Deposit
FILP
Special
Account
Government
Institutions
Loans
Industry
Investment
Account
Investment
12
DBJ’s New Management

Transparency and Accountability
• Accountability to the national citizens

Maintenance of Financial Soundness
• Assurance of repayment
• Cost recoverable operation

New Financial Tools
• Project finance, Asset finance, M&A

Knowledge Bank Function
• Money is a part of necessary resources
13
Ensuring Operational
Transparency and Accountability

‘Medium-term Policy Principles’ and ‘Investment & Finance
Guidelines’
•
•

Management Council
•
•

Three priority areas
Disclosure of loans, debt guarantees, and investment
External experts and professionals (academia, private financial institutions,
mass media, etc.)
Review of the status of operational performance
Disclosure of Operations and Financial Conditions
•
•
•
Disclosure of financial conditions on an equal basis with that of private financial
institutions
Information dissemination through the annual report and the Internet
Evaluation of policy effectiveness
14
Maintenance of Financial Soundness


Risk Management to Maintain Sound Operations
Credit Risk
• Internal rating system started in FY 1999
• Self asset appraisal started in FY 2000
• External audit by independent accounting firm
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
Market Risk
Liquidity Risk and Interest Rate Risk
• ALM management
• Portfolio management

Foreign Exchange Risk
• Forex swaps
15
Strengthening the Knowledge Bank
Function

Knowledge Bank Function as a Highly Developed Form of Fund
Supply
• Main areas ： new financial measures, improvement of social capital,
environmental protection
Project Support Activities
･Planning and implementation of projects
･New partnership between the public and private sectors
･Risk sharing


Technical Assistance: International Cooperation Activities
Fostering Human Resources with High Expertise
16
Appropriate Action on Policy Issues


Work Management Based on Policy Matters and with a Different
Role than That of Private Finance
Swift Response to Medium- and Long-term Issues in Japan
•
•
•
•
•

Promotion of regional industries, town planning
Environmental protection
Improvement of social capital
Support for industrial activities（IT, development of new business）
Response to an aging, or maturing, society with a decreasing
birthrate
Active Approach to New Financial Measures
• Project finance, asset finance
• M&A, utilization of debt guarantee function
• Response to direct finance
17