be seen as “ back to basics ” of financial operations has been occurring in the united states and europe. proprietary trading of complex products, such as securitized products and derivatives, has complicated the risk profiles of financial institutions and made risks difficult to manage. based on such recognition, a move to return to the traditional business based on customer transactions has been emerging. the move includes a re - evaluation of traditional businesses related to deposits and payment and settlement while taking into account a viewpoint of improving the management of liquidity risk. those businesses are, so to speak, the areas japanese financial institutions have been good at. one question for financial institution management in japan is whether the costs associated with maintaining deposit bases are commensurate with the profits. retail banking is associated with a variety of unique factors that lead to an increase in costs, including atm that operates 24 hours. meanwhile, to charge fees for the current deposits whose balance dropped below the required minimum balance is not gaining customers ’ understanding. while how to balance the costs and profits is an important management judgment, it would be absolutely necessary for financial institutions to avoid the possibility of running below break - even. as financial institutions are expected to provide fine - tuned services to households reflecting their outstanding balance of deposits and the degree of use of services, it would be necessary to check the balance between the quality of services and the cost sharing. in addition, if one assumes a situation in which households ’ asset accumulation further progresses and their asset management diversifies, it would be essential to enhance the services to support households ’ asset management. such services are currently provided in the form of over - the - counter sales of mutual funds and insurance, and asset management services. by properly gauging the needs of customers and enhancing the provision of services, i believe it important that the fee business steadily takes root. personal loans second, the role of personal loans. in japan, housing loans have overwhelming weight and accounts for about 20 percent of the financial institutions ’ total lending. housing loans in japan have been increasing steadily even under the current financial crisis. the problem is its profitability. according to the bank ’ s analysis, the profitability of japanese financial institutions ’ housing loans has been consistently declining recently. for example, if the profitability of housing loans during the life of a loan that was lent in fiscal 2003 and fiscal 2007 is compared on a present value basis, it will decline by about six percentage points. if the default rates rise significantly in the future, it cannot be

fluctuate according to economic developments, which lead to changes in capital. in addition, if financial institutions pursue a new business strategy to meet a variety of needs from firms and households, capital bases that can tolerate risks of a certain degree need to be enhanced. both the major banks and the regional banks have recently been reinforcing their capital bases, which the bank regards could lead to ensure soundness of individual financial institutions as well as the stability of the financial system as a whole. appropriate risk management second, the importance of appropriate risk management. for a financial institution, risk management is essential in ensuring management soundness and maintaining the smooth financial intermediation function as well as a key to ensuring profits. in terms of credit risk management, japanese financial institutions have been improving their screening skills, based on the experience of the bubble period during the 1980s, and have made fair accomplishments. however, the deterioration in firms ’ business performance triggered by the current financial crisis has progressed at an unprecedented pace. taking that into account, it becomes important for financial institutions, in addition to improving their screening skills, to strengthen follow - up management, and further strive for supporting corporate rehabilitation. moreover, the finely - tuned setting of lending interest rates according to credit risks continues to be an important challenge. in terms of market risk management associated with stockholdings, the size of strategic cross - shareholding will be basically left to firms ’ and banks ’ business strategies. however, the current market risk associated with stockholdings of japanese financial institutions as a whole remains to be high relative to capital bases, and a steady reduction in the amount of that risk is no doubt a critical challenge for financial institution management as well as for the stability of japan ’ s financial system. building a business model to strengthen profit base – focusing on retail banking third, building a business model to strengthen the profit base. while i will focus on the topic of today ’ s speech, retail banking, reinforcement in the area of wholesale banking is also essential for strengthening the profit base. retail banking could provide higher value - added services by managing it in an integrated way with wholesale banking. for the major banks, how to formulate coordination between wholesale and retail banking would be one of the keys to rebuilding their business model after all. operations related to deposits, payment and settlement, and asset management to that end, first i will take up the role of operations related to deposits, payment and settlement, and asset management. after the current financial crisis, a phenomenon to