Finance Minister Hiroshi Mitsuzuka on Wednesday applauded moves on the part of major Japanese banks to accept an infusion of public funds through the government-supported purchase of their preferred stock and subordinated bonds.On Tuesday, leading Japanese banks such as the Bank of Tokyo-Mitsubishi and Sanwa Bank indicated that they are preparing to issue such stocks and bonds to be purchased by the Deposit Insurance Corp. to help stabilize the financial sector.On Wednesday, the Bank of Yokohama, Japan’s top regional bank, also said it would accept the public funds. Mitsuzuka told a regular news conference that he views such moves as a voluntary effort on the part of the banks to boost the credibility of the nation’s banking sector.Financial institutions had been reluctant to shore up their capital base with the help of public funds because of fears of excessive pressure from regulatory bodies stemming from the capital injection. “It will also provide a greater sense of security for (market players) abroad for such international banks to operate with a strengthened capital base,” Mitsuzuka said.The government plan, providing for the use of a maximum 30 trillion yen in public funds, includes government-backed purchases of preferred stocks and subordinated bonds issued by Japanese banks to enhance their capital bases.Bank sources said banks had feared the issuance of such shares and bonds would make them appear financially weak, but that would change if the two strong banks take the lead in applying for the purchases, providing reassurance and encouraging other banks to follow suit.Naotaka Saeki, president of Sanwa Bank, said at a press conference Tuesday that his bank would positively consider going outside its sphere as a commercial entity when necessary to bolster credit in Japan. The sources said Saeki’s statement reflects his position as chairman of the Federation of Bankers Associations of Japan.The banking industry has recently been blamed for the credit crunch in Japan because of its reluctance to extend loans ahead of the Finance Ministry’s imposition in April of tougher capital adequacy requirements.The government-backed purchase of preferred stocks and subordinated bonds which can be counted as capital in the banks’ capital-to-asset calculations is expected to ease their grip on credit, they said. The Bank of Tokyo-Mitsubishi, whose head Satoru Kishi will succeed Saeki as the industry group’s head in April, is considering issuing subordinated bonds, but not preferred stocks, because its in-house articles do not provide for such issuance.
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