The government should extend additional guarantees of up to 10 trillion yen to Deposit Insurance Corp. to help boost financial institutions' capital and prevent their collapse, the ruling Liberal Democratic Party basically decided Wednesday.
As a result, the DIC would be entitled to 20 trillion yen in government guarantees on the funds it borrows from such lenders as the Bank of Japan. In addition, key members of a party panel on financial stability agreed that 3 trillion yen worth of government bonds given to the DIC would be used to help recapitalize financial institutions through purchases of their preferred stock and other means.
This 3 trillion yen is part of the 10 trillion yen in bond issues the government would give to the DIC for offering aid to financial institutions that accept operations of a failed bank and recapitalize still-operative banks.