Matsunaga makes reassurances on Midori absorption

In a statement released Friday, Finance Minister Hikaru Matsunaga said that all deposits at Midori Bank will be transferred to the new bank and that depositors should show proper "conscience behavior."

Kimio Yamaguchi, head of the Finance Ministry's Banking Bureau, said that Midori Bank's losses are estimated at between 350 billion yen and 400 billion yen, and that most of them were inherited from now-defunct Hyogo Bank.

The losses will be covered by money from government-backed Deposit Insurance Corp, Yamaguchi told a news conference. DIC will also buy an undetermined amount of nonperforming loans from Midori, he said.

Meanwhile, Bank of Japan Gov. Masaru Hayami issued a statement Friday evening saying the central bank supports the merger will play its role to ensure a smooth melding of the two banks.

"Until the implementation of the merger, the Bank of Japan, if necessary, will take steps to secure funds to continue operation of Midori Bank," including loans.

BOJ officials said the de facto failure of Midori was regrettable, but maintained that the need to swiftly set up a scheme to take care of Hyogo Bank in the wake of the Great Hanshin Earthquake in 1995 made it difficult to devise a perfect plan.