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Saturday, Aug. 22, 1998
Huge Japanese bank plans restructuring
Leading lender to write off $5.3 billion in bad loans, seeks government aid
By MARTIN FACKLER
Associated PressTOKYO -- In a crucial test of Japan's ability to clean up its ailing financial system, the troubled Long-Term Credit Bank of Japan Ltd. proposed a far-reaching restructuring and requested government financial support for the plan.
The bank will close all overseas operations, sell its Tokyo headquarters and cut more than 700 employees this year to make it fit for its previously-disclosed plans to merge with Sumitomo Trust and Banking Co.
President Katsunobu Ohnogi said Friday the bank plans to write off about $5.3 billion in bad loans by the end of the year and called on the government to provide money for that as well as for the planned merger with Sumitomo.
LTCB is one of Japan's biggest lenders. Speculation that it may collapse under the weight of failed real estate loans made during the late 1980s had driven down share prices of other Japanese banks.
Japanese newspapers said Friday the government has decided to inject $3.5 billion to $7 billion into LTCB to help it dispose of bad loans and make it more attractive to Sumitomo.
``It is really desirable that the financial system be stabilized by the smooth merger of these two banks,'' Prime Minister Keizo Obuchi was quoted as saying by Kyodo News agency after the restructuring plan was announced.
Even with the government aid, Ohnogi said LTCB expects to lose $4.8 billion this year because of the write-offs. Ohnogi said he and the entire board will resign.
Opposition leaders were quick to criticize the use of public funds. Takeshi Noda, secretary general of the minority Liberal Party, said the government should let market forces work to clean up the banking sector's problems, Kyodo News agency reported.
How Japan deals with LTCB's problems is seen as an important measure of its ability to revive its debt-ridden banking system and stop problems there from dragging down the whole economy.
The prime minister took the unusual step of calling the president of Sumitomo Trust, Atsushi Takahashi, to his residence late Thursday to ask him to move quickly on a proposed merger between his bank and LTCB.
Sumitomo was reportedly reluctant to go ahead with the merger announced in June because of concerns about the level of bad loans at LTCB.
Obuchi and Takahashi discussed ways the government might support the merger, Obuchi told an upper house budget committee Friday morning.
The Long-Term Credit Bank has denied it faces failure. But with its share price at historic lows, analysts said it would be difficult for the bank to remain afloat on its own with investor confidence so weak.
Unlike conventional banks, LTCB raises money by issuing bonds. Analysts worry that could become difficult as investors increasingly view the bonds as a risky investment.
News of the restructuring efforts boosted LTCB shares 32 percent in Friday's trading.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web