retail financial services that accurately meet the various needs of households, it is necessary to ensure sound competition among financial institutions. however, in the past, the government and the bank showed extreme care in handling even a small sign of instability within the financial system, bearing in mind that it could generate systemic risk and damage the stability of the entire system. however, in the course of the last ten years, we have seen the firm establishment of a safety - net system necessary for handling such situations as the bankruptcy of a financial institution, and the government and the bank have accumulated practical experience in dealing with such emergencies. furthermore, financial institutions have now nearly overcome the npl problem, and from april 2005 the blanket guarantee of deposits was fully lifted without any disruption. considering this situation, in order to promote the sound development of the japanese economy, i think it is appropriate to shift the main focus of policies regarding the financial system from crisis management to strengthening the financial function. enhancement of financial functioning is strongly needed also in retail financial services. for example, complicated financial products that require a high level of knowledge are increasing. in this situation, financial institutions are expected to fulfill their function by providing individuals with easy - tounderstand product information, and adequately transforming complicated products into easily understood ones. to this end, a key policy issue will be to secure an environment that allows free competition among a wide range of financial institutions, including public ones, to promote innovations in improved financial products and services. c. solidifying mutual trust between financial institutions and households another key policy issue is to establish a relationship based on enhanced mutual trust between financial institutions and households. between financial institutions and households, there exists an extremely large disparity in financial knowledge and amount of access to relevant information. in addition, financial institutions store a massive amount of personal information. from a policy perspective, therefore, it is extremely important to minimize harmful influences stemming from this information disparity and information concentration, and to encourage voluntary measures by financial institutions to contribute to a relationship with customers based on enhanced mutual trust. considering the high possibility that various types of financial institutions, including companies other than banks, will become involved in a wide range of financial services, a relationship based on enhanced mutual trust with individuals becomes all the more important. mutual trust should be reinforced in various stages of intermediary functions, such as during the development of financial products, sales, and asset management. i would like to emphasize two points indispensable to that end. my first point concerns

treatment as possible to such issues as new types of transactions accompanying progress in information technology ( i. e., fund transactions using customers ’ computer terminals ).