Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: Joseph G. who wrote (7838)	10/6/1998 11:20:00 PM
From: Joseph G.	Read Replies (1) \| Respond to of 86076

<<TOKYO, Oct 7 (Reuters) - The following are the main points of a proposed plan by Japan's ruling Liberal Democratic Party (LDP) to recapitalise weak but viable banks, according to a draft obtained by Reuters. I. Pass bills to create a new fund to boost banks' capital by buying either common stocks or preferred shares. Common stocks would be purchased only in the case of ''extremely undercapitalised banks.'' The scheme would be in effect until end-March 2001. A. Banks subject to the scheme. 1. If an ''extremely undercapitalised'' bank applied for such treatment, the government would buy the bank's common stocks and the state would get involved in the bank's management. The bank's management would be fired or have to take some other form of responsibility, and equity stock would be reduced and the bank would have to carry out drastic restructuring. 2. In addition to ''extremely undercapitalised'' and ''undercapitalised'' banks, those whose capital-asset ratio is eight percent or above will be able to apply for capital injections, such as in the form of purchases by the government of preferred shares, in cases where such steps are needed to avoid a deflationary spiral, financial system crisis or negative impact on local economies and employment. NOTE: 1. Those banks with eight percent capital-asset ratios which can obtain capital injections through government purchases of preferred shares would in principle be limited to ''receiver banks'' which take over failed financial firms, cases where such a step is necessary to avoid a sudden and large-scale credit crunch, and cases which would promote mergers and other forms of industry consolidation. 2. The definition of ''extremely undercapitalised'' and ''undercapitalised'' banks will be decided later by the new financial oversight committee. B. The source of funds for the scheme would be Bank of Japan loans backed by government guarantees, and other unspecified sources. Such funds would be recoverable. C. With approval from the financial oversight committee, the purchase of problem loans from financial institutions in general would be possible until end-March 2001, at an ''appropriate price.'' II.Strengthening of current system A. Prompt corrective action The Financial Supervisory Agency (FSA), in addition to ordering drastic restructuring, would execute the following directives to ''extremely undercapitalised'' banks: 1. For internationally operating banks with capital-asset ratios under four percent (under two percent for purely domestic banks), order them to boost capital. 2. For internationally operating banks with capital under two percent (under one percent for domestic banks), order a swift capital increase. Banks so directed must decide whether to boost capital, merge, transfer their business, drastically shrink operations, or shut down. NOTES: a. When calculating capital-asset ratios, banks would be able to do so based either on purchase price, or the lower of purchase price or market value (so-called ''lowest cost method''), giving due consideration to the credit crunch. But in future this accounting procedure would be subject to review, once stability returned to the financial system. b. It would also be possible for the new financial oversight committee (Financial Revival Committee) to place such banks under special public administration. B. Monitoring and Inspection The FSA will set guidelines for setting aside loan-loss reserves on category three problem and category four bad loans and consider more detailed breakdowns for category two (so-called ''grey problem loans''). C. The FSA would order banks with capital under four percent (domestic two percent) to set up a committe of outsiders such as lawyers to clarify management responsibility under criminal and civil law.>> They're broke and still don't mark to market to pretend that nobody knows it ...