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To: Ian Davidson who wrote (85148)	12/13/1998 11:46:00 PM
From: Mohan Marette	Read Replies (2) \| Respond to of 176387

Japan Nationalizes Ailing Bank Ian: How is this for some good news,huh? ================================================== 10.54 a.m. ET (1554 GMT) December 13, 1998 By Miki Shimogori TOKYO — Japan took another step forward Sunday toward cleaning up its festering banking industry by declaring the long-troubled Nippon Credit Bank insolvent and putting it under state control. Haruyoshi Yamaguchi/Reuters NCB president Shigeoki Togo said that top management disputed the government's findings and told reporters the decision was regrettable and taken too quickly Prime Minister Keizo Obuchi said the decision was made after the government's financial watchdog determined that NCB was swamped with liabilities. Such a move had long been advocated by financial analysts and the surprisingly fast action is expected to help restore confidence and demonstrate that the traditional "convoy" system to protect weak banks was over. NCB is the second Japanese bank in two months to become state-owned under Tokyo's 18 trillion yen ($155 billion) plan to nationalize failing banks and revive its fragile financial system — a root cause of the nation's long recession. Japan's worst postwar economic slump has been blamed for Asia's inability to extricate itself from the effects of a regional financial crisis, and Obuchi has repeatedly promised to tackle the banks' bad loan problem. The nationalization of NCB, which followed similar government action in October on the Long-Term Credit Bank of Japan Ltd (LTCB), was inevitable to eliminate worries about the nation's financial system, government officials said. The bank had a total 3.74 trillion yen worth of problem loans at the end of March and it suffered a capital shortage of 94.4 billion yen once it took the necessary loan loss charges, the government watchdog Financial Supervisory Agency (FSA) said. Obuchi said he was assured that the bank's deposits, debentures and interbank transactions will be fully protected. "The government will continue to take all possible measures to protect depositors and others, to maintain order in the financial system and to stabilize financial markets both in Japan and abroad," the prime minister said in a statement. But NCB president Shigeoki Togo said that top management disputed the government's findings and told reporters the decision was regrettable and taken too quickly. He and the other top executives will resign. The news of NCB's demise was widely expected but some traders said it could hit banking shares Monday as investors look to who could be next. Masatoshi Kikuchi, senior strategist at Daiwa Institute of Research said, that while the news would cheer foreign investors anxious to see Japan dump its policy of protecting banks, shares in banks with comparably troublesome credit ratings to NCB may be sold off. NCB's long-term deposit has a Baa3 rating by Moody's Investors Service, a level which signals possible investment risk. Those with same ratings include Yasuda Trust & Banking Co., Daiwa Bank and Chuo Trust & Banking Co. Minister for Financial Revitalization Hakuo Yanagisawa said that he had not heard of any other insolvent banks, but Economic Planning Agency chief Taichi Sakaiya earlier warned that there could be more financial firm failures. "The financial problems will reach a turning point in the next several months before (the financial system) moves toward a relatively healthy state," Sakaiya said on NHK television. "There will be more financial firms that will be forced out of the markets," he said. NCB had hoped to take steps to boost its capital — such as a merger — but ultimately failed to find a suitor. Earlier this week, Chuo Trust and NCB announced a possible partial alliance, but Chuo Trust flatly ruled out a merger. Financial sources say Chuo is still seen likely to be the one to eventually take over NCB's operations if it can clean up its balance sheets after being nationalized. NCB's financial troubles first came to light in April 1997, when the bank announced restructurings including withdrawal from overseas operations and a capital infusion from the government and other financial firms. In August 1997, Togo, a former central banker, took the helm to oversee the painful restructuring.