Bills critical to the stability of the nation's banking sector cleared the Upper House Committee on Financial Affairs on Friday. They are expected to be enacted by the chamber's plenary session Monday.
The two bills will enable Deposit Insurance Corp. to use up to 30 trillion yen in public funds to protect deposits and inject new capital into banks up to the end of March 2001. The Upper House committee voted in support of the bills late Friday afternoon with the majority held by the Liberal Democratic Party and one of its two non-Cabinet allies, the Social Democratic Party.
New Party Sakigake, the other ruling bloc ally, is not represented in the committee. The 30 trillion yen comprises 10 trillion yen in government bonds given to the DIC that can be converted into cash upon request and 20 trillion yen worth of government guarantees on the DIC's borrowings.
Although there was little resistance to the use of public funds to cover deposits at failed financial institutions, the opposition parties attacked the DIC's suggested purchase of banks' preferred stock and subordinated bonds, criticizing the move as effecting a publicly funded bailout.
Deliberations on the bills were also slowed by the recent scandal in which two Finance Ministry banking inspectors were arrested for allegedly receiving bribes from major banks. The law will take effect immediately after it has been promulgated.
The government, upon securing Diet passage of the financial stability bills, will submit to the Diet the state budget for fiscal 1998, which begins April 1.