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[TOKYO] Japan has decided to cut the deposit insurance premiums paid by banks for the first time as the industry has seen fewer failures and public-funded bailouts in recent years.
Banking industry officials estimate the cut, effective from April 1, will save the industry about 200 billion yen (S$2.29 billion) annually.
Japan's deposit insurance system, which guarantees account holders a certain amount of principal and interest in the event of a bank failure, racked up a deficit of as much as US$33.5 billion during the depths of Japan's post-bubble financial crisis in the early 2000s.
Deposit Insurance Corp of Japan (DICJ) said on Friday it would halve the deposit insurance premium to 0.042 per cent of deposits. It is the first rate cut since the system started in 1971.
DICJ raised the rate to 0.084 per cent in 1996 when it was hit with an increasing number of banks seeking a public bailout.
Fewer banks have sought bailout funds in recent years and there has been no bank failure since 2010. As a result, DICJ's reserve had a surplus of 1.7 trillion yen at the end of March last year, prompting banks to call for a cut in insurance premiums.
Starting two years ago, DICJ decided to pay back part of the annual premium on condition there was no bank failure during the year.
Resona Holdings Inc said in February it would repay the remaining 128 billion yen in bailout money it owed after its shareholders' meeting in June. That would make it the last major bank to repay the state for help received during Japan's financial crisis.