Public money was injected into 21 banks in March although the government’s screening panel did not know the banks’ financial details, Yoko Sazanami, the panel’s head, told the Diet on Tuesday.
In her remarks, Sazanami effectively confessed that her panel did not scrutinize the Long-Term Credit Bank of Japan. Only a few months after it received a 177 billion yen injection of public funds, approved by the panel, the LTCB’s precarious financial position began making headlines, and the bank now plans to apply for more public money.
“At the time of the capital injection in March, we put priority on stabilizing the financial system,” Sazanami told the Lower House special committee on financial stabilization. “We did not know details of individual banks.”
Sazanami’s comments came in response to Yoshito Sengoku, a legislator of the Democratic Party of Japan. Sengoku claimed the LTCB had not written off a sufficient amount of its bad loans. If the bank had put up reserves for losses of 10 percent of its problem loans back then, its capital would have become minus 417.3 billion yen, he said. “Did you not know this?” Sengoku asked.
Sazanami, a Keio University professor of economics, said her panel examined the banks’ self-assessed loan situations and asked the Finance Ministry and the Bank of Japan whether their assets were sound. For a future screening, she said, “We would like to examine more in detail and produce results that do not invite criticism.”
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