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Finance Minister Hikaru Matsunaga reacted cautiously Tuesday to using public money to reinforce the Resolution and Collection Bank so its functions can include lending.

The idea is intended to expedite the liquidation of collapsed banks by taking over their loans that may become irrecoverable.

Officials of the ruling Liberal Democratic Party have started to consider plans to nationalize RCB for this purpose and facilitate disposal of bad debt assets at commercial banks. Taku Yamasaki, chairman of the LDP’s policy affairs research council, in a Monday interview with the economic daily Nihon Keizai Shimbun, proposed that fiscal investment and loans be used as a resource for RCB lending.

Matsunaga said there are a number of issues to examine before the government can use fiscal investment and loans, which are known as the second state budget. One concern is what party should take the risk of lending and in what way, he told a regular news conference.

But Matsunaga also said it is important to protect relatively sound borrower firms by continuing lending after their lender banks collapse. The LDP idea is a response to the tendency of commercial financial institutions to only take over the sound assets of collapsed banks.

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