The inspection of banks by the Ministry of Finane in wartime Japan 1935〜1945, with special reference to 'prudential regulation'

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  • 戦時体制下における大蔵省銀行検査 : プルーデンス規制としての側面を中心に
  • センジ タイセイ カ ニ オケル オオクラショウ ギンコウ ケンサ プルーデンス キセイ ト シテ ノ ソクメン オ チュウシン ニ

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The financial crises of the interwar period left the Japanese banking system with a heavy burden of non-performing loans (NPLs). However, the problem was largely resolved during the period of the wartime economy. the main object of this paper is to clarify the role of the regulatory agency in managing the crises, by focusing mainly on the inspection of banks carried out the Ministry of Finance (MOF). The first section of the paper examines three components of the bank examination system: the budget provided, the nature of the staff, and the actual procedures followed. The second section is an analysis of the policy and functioning of the system based on the historical records of zaibatsu banks and dominant regional banks. The third section investigates Ryo'u Bank as a concrete example of the role of the inspection process in accelerating the disposal of NPLs. In conclusion, it is clear that the MOF inspection system included both mechanisms that accelerated the disposal of NPLs and improved prudential techniques that were incentive compatible. The financial problems were overcome through a combination of three factors: the overall economic recovery, the endeavors of bank managers, and the inspection system, which improved the risk management capabilities of bank managers.

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