Kankaku Securities Co. formally announced Friday that it will shore up its capital base with 30 billion yen in aid from Dai-Ichi Kangyo Bank, making it a de facto subsidiary of the major city bank.

Kankaku President Chuuichi Numata told a news conference that his firm will issue 30 billion yen in new shares to be acquired by DKB, boosting the bank’s stake in the second-tier brokerage from the current 4.9 percent to 37 percent.

Shareholdings by the entire DKB group of firms in Kankaku will total 54 percent after the share acquisition, he added. The additional shares could be issued as early as next month, officials said. “We felt we needed to galvanize (our capital base) to lay to rest concerns among the public over our soundness and to better carry out necessary reforms ahead of the financial deregulation,” Numata explained.

Kankaku, which already has close ties with DKB, has been logging pretax losses for seven straight business years.

Although a firm is not legally a subsidiary unless more than 50 percent of its stock is owned by the parent firm, Numata acknowledged that the relationship with DKB will effectively be that of parent-subsidiary.

Of the 30 billion yen, 15 billion yen will be directly infused into the brokerage’s capital base while the remainder will be placed in reserve funds.

This marks the first time in which a bank will take under its wing a securities firm that has more assets than liabilities. The move was enabled by revisions to the Antimonopoly Law last year.

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