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The government and the ruling Liberal Democratic Party have outlined a new plan to inject public funds into ailing banks to replace the bank-recapitalization law that will be scrapped, government and LDP officials said Tuesday.

The specific contents of the outline and the timing of presenting it to the opposition camp remained unclear Tuesday night, with many key LDP officials denying contents of the plan floated by others.

According to some LDP sources the plan calls for the government to buy prescribed percentages of common shares of banks in rough proportion to the degree of depletion of each bank’s capital adequacy ratio.

The government would purchase less than 50 percent of common shares of a bank whose capital adequacy ratio has dwindled to between 4 percent and 8 percent, and more than 51 percent of those with a ratio between 2 percent to 4 percent.

If the ratio plunges below 2 percent, the state would be obliged to buy all common shares of the bank, thereby, putting it under special public administration.

Banks with their capital ratio at 8 percent or more are considered to be sound enough to operate internationally according to the international guidelines set by the Bank for International Settlements.

In exchange for capital injection, the government would discipline top management and shareholders of recipient banks, such as forcing managers out, mandating greater disclosure and using shareholder’s equity to dispose of a part of a bad loan.

Speaking to reporters in the late afternoon, however, Yukihiko Ikeda, LDP’s policy affairs chief, flatly denied the plan outlined above, saying that the idea under consideration is quite different.

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