Japan's Nippon Credit Bank put under government control
Copyright © 1998 Nando Media
Copyright © 1998 The Associated Press
TOKYO (December 13, 1998 2:40 p.m. EST nandotimes.com) -- The Japanese government Sunday took over operations of Nippon
Credit Bank Ltd. after financial authorities declared the bank insolvent with at least $27 billion in unrecoverable or high-risk loans and
massive stock valuation losses.
The government took control of the bank, overriding objections from bank executives who insisted it was not insolvent.
"I have decided to place the bank under special public management from today," Prime Minister Keizo Obuchi announced in a
statement.
It was the second time in recent months that a top Japanese lender has come under state control. In October, the government took over
the Long-Term Credit Bank of Japan Ltd. when a huge burden of bad loans threatened to sink it.
Nippon Credit, with 2,000 employees, was among the world's top 50 banks in 1997, according to Fortune magazine. It had $106 billion
in assets.
The move was widely expected after Japan's Chuo Trust and Banking Co. denied reports last week it was considering a buyout of
Nippon Credit.
Obuchi said the action was taken to safeguard depositors and shore up confidence in the Japanese financial system.
"The government will continue to do whatever is needed to protect depositors and credit markets, and ensure the stability of financial
markets at home and abroad," Obuchi said.
On Friday, the Financial Supervisory Agency determined the bank could not restructure on its own and moved to pull the plug. But
Nippon Credit executives balked at a government request Saturday that they voluntarily apply for nationalization.
Bank executives who oppose the nationalization have argued that the agency's standards for judging loan risks were too strict. They
might also have feared a government takeover because the law requires top managers of nationalized banks to resign.
Nippon Credit President Shigeoki Togo said Sunday the bank had no choice but to accept the government decision.
All of the bank's top executives will resign to make room for the government-appointed managers, Togo said.
Many of the problem loans that hurt Nippon Credit were made by subsidiaries that extended easy credit to real estate developers during a
speculative land price boom in the late 1980s. The debts quickly soured at the outset of this decade with the collapse of Japan's
economy.
Nippon Credit also was hurt by deregulation and development of Japan's financial markets that allowed companies to raise money more
cheaply by issuing bonds and selling equity, thus reducing demand for bank loans.
The government was expected to announce plans shortly for buying all outstanding shares of Nippon Credit. But because the bank is
insolvent, shareholders are unlikely to receive much, if any, compensation.
By CHESTER DAWSON, Associated Press Writer |
