The Act on Special Measures for Strengthening Financial Functions creates temporary special measures for strengthening financial functions, especially capital enhancement of financial institutions and related reorganizations. Financial institutions, banking researchers, regional-finance analysts, and public-law readers consult it when checking how applications, Management Strengthening Plans, ministerial decisions, publication, and follow-up supervision are structured. This article covers selected core provisions of the Act and does not evaluate whether a particular institution should receive capital support.
Purpose and Covered Financial Institutions
The Act begins by explaining why special capital measures exist and which institutions are covered. Articles 1 and 2 define the scope of the statute and the main actors used throughout later chapters.
Article 1 states that the Act aims to strengthen the financial functions of Financial Institutions, etc. in response to changes in circumstances surrounding them, by taking special measures concerning capital enhancement for the time being. The stated policy goals are sound and efficient operation of financial institutions, revitalization of regional economies, maintenance of credit order, and sound development of the national economy.
Article 2(1) defines Financial Institutions, etc. by listing banks, long-term credit banks, Shinkin Banks, credit cooperatives, labor banks, federations of those cooperative institutions, the Norinchukin Bank, specified agricultural and fisheries cooperative federations, and bank holding companies and similar holding companies. Article 2(2) defines Shares, etc. to include shares, subordinated bonds meeting Cabinet Order conditions, and preferred equity in cooperative financial institutions.
Article 2(3) defines Subscription for Shares, etc. to include subscription for Shares, etc. or loans through subordinated loan agreements that meet Cabinet Order conditions. Article 2(6) defines Financial Organization Reorganization by listing share exchanges, share transfers, mergers, company splits, business transfers, and specified share deliveries involving Financial Institutions, etc. Article 2(7) and Article 2(8) separately define Central Financial Institutions for Cooperatives and Cooperative Financial Institutions.
Capital Enhancement Applications and Plans
Chapter II creates the ordinary route for capital enhancement of Financial Institutions, etc. Articles 3, 4, 5, 5-2, 6, 7, 8, and 9 are the main provisions for applications, Management Strengthening Plans, decisions, and publication.
Article 3 provides that when the Deposit Insurance Corporation receives an application from a Financial Institution, etc. for Subscription for Shares, etc. to enhance its capital, the Corporation must jointly request a decision from the competent minister on whether the subscription should be made. Article 3(2) contains a similar rule for applications by bank holding companies and similar holding companies where the subscription is for capital enhancement of a subsidiary that is a Financial Institution, etc.
Article 4 requires the applicant Financial Institution, etc., or the target subsidiary in a holding-company application, to submit a Management Strengthening Plan through the Deposit Insurance Corporation. The plan must state an implementation period of not more than three years, management-improvement targets, measures for achieving them, matters concerning responsible management systems, measures contributing to smooth credit supply to small and medium-sized enterprises and regional economic revitalization, the amount and content of requested subscription, and other matters prescribed by Cabinet Order.
Article 5 states the conditions under which the competent minister is to decide that the requested Subscription for Shares, etc. should be made. The conditions include conformity of plan targets with standards, likelihood of achieving the targets, appropriateness of measures for regional finance and economic revitalization, likelihood of smooth and reliable implementation, non-failure status of the applicant, necessity of support, difficulty of disposal or repayment not being recognized, and appropriate asset assessment. Article 5-2 contains Companies Act special rules for allocations connected with subscription by the agreement bank. Article 6 requires publication of submitted plans and decisions, subject to protection of depositor and transaction secrets and other statutory limits.
Article 7 provides rules for acquisition of Shares, etc. by the agreement bank after a positive decision. Article 8 requires submission of implementation-status reports on the Management Strengthening Plan, and Article 9 authorizes the competent minister to request reports, materials, or revisions and to order necessary measures if plan implementation is insufficient.
Financial Organization Reorganization Measures
Chapter III provides special capital-enhancement measures for Financial Institutions, etc. conducting Financial Organization Reorganization. Articles 10, 11, 12, 13, 14, and 15 are the main provisions.
Article 10 provides the application route where Financial Institutions, etc. conducting Financial Organization Reorganization seek Subscription for Shares, etc. for capital enhancement. Article 11 requires submission of a Management Strengthening Plan for the reorganization case. The plan must state the reorganization implementation period, management-improvement targets, measures, responsible management systems, measures for regional economic revitalization, the requested amount and content, and other prescribed matters.
Article 12 states the decision conditions for reorganization-related capital enhancement. The competent minister must check statutory requirements including plan targets, likelihood of achievement, contribution to regional finance and economic revitalization, implementation certainty, and necessity of the subscription. Article 13 provides Companies Act special rules connected with subscriptions after a reorganization-related decision.
Article 14 requires publication of the Management Strengthening Plan and the ministerial decision, subject to statutory exclusions for information whose publication could harm depositor or transaction secrets or other interests. Article 15 provides rules on acquisition of Shares, etc. by the agreement bank after a positive reorganization decision. Later provisions in the chapter address reports, supervision, and follow-up measures after the reorganization support is implemented.
Cooperative Financial Institution Route
The Act contains a special route involving Central Financial Institutions for Cooperatives and Cooperative Financial Institutions. Articles 34-2, 34-3, 34-4, 34-5, 34-6, and 34-7 are the main entry points.
Article 34-2 provides for applications concerning Subscription for Shares, etc. by a Central Financial Institution for Cooperatives to enhance the capital of Cooperative Financial Institutions. Article 34-3 requires submission of a Management Strengthening Plan for those cases, including management-improvement targets, measures, regional economic revitalization measures, and subscription details.
Article 34-4 states decision requirements for this cooperative route. The competent minister considers whether the plan targets meet standards, whether implementation is likely, whether regional-finance measures are appropriate, and whether the requested subscription is necessary for capital enhancement and plan implementation. Article 34-5 requires publication of the plan and decision, subject to statutory confidentiality limits.
Article 34-6 provides rules concerning acquisition of preferred equity and other interests, and Article 34-7 requires submission of reports on plan implementation. These provisions adapt the capital-enhancement structure to cooperative financial institutions rather than ordinary stock-company banks.
Agreement Bank, Reports, and Oversight
The Act relies on the Deposit Insurance Corporation and an agreement bank to implement decisions and manage acquired interests. Articles 35, 36, 37, 38, 39, 40, 41, and 42 are useful landmarks for implementation and oversight.
Article 35 authorizes the Deposit Insurance Corporation to conclude an agreement with a bank for acquiring Shares, etc., lending through subordinated loans, holding and disposing of acquired instruments, and receiving repayment. Article 36 requires the Corporation to entrust business to the agreement bank under the agreement and provides related implementation rules.
Article 37 addresses funding and financial arrangements for the Corporation in connection with the special measures. Article 38 concerns reporting to the competent minister and related supervision. Article 39 authorizes the competent minister to require reports from relevant institutions where necessary to enforce the Act, and Article 40 allows on-site inspections within the statutory scope.
Article 41 contains confidentiality duties for persons involved in the special measures, and Article 42 provides penalty rules for specified violations. The Act's operative pattern is therefore plan submission, ministerial decision, implementation through the Corporation and agreement bank, publication, periodic reporting, and supervision.