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The Diet on Friday enacted the new bank recapitalization law after it was approved by an Upper House plenary session, giving the nation’s capital-short banks a chance to have public funds injected into their bases through government purchases of their preferred and common stock.The bill’s enactment, supported by the Liberal Democratic Party and two opposition forces — the Liberal Party and the Heiwa-Kaikaku parliamentary group, concludes months of political wrangling between the LDP and the opposition on how to fix the nation’s crumbling banking system. It also brought to a close the Diet’s extraordinary nine-day session.The legislation takes the place of a capital injection law that was enacted in February by imposing on banks more stringent conditions than there were previously on the use of public money in aiding banks forced to write off huge amounts of bad loans.The law allows the government to inject funds into banks by purchasing their newly issued preferred and common shares in proportion to the amount of depletion of the banks’ capital-adequacy ratios.Any bank seeking public funds must apply to an independent panel that can approve or reject the request, and the panel will also have the authority to assess specific conditions under which a bank may receive public funds.The third and largest opposition force, the Democratic Party of Japan, voted against the bill, saying that there is no provision for proper disclosure of recipient banks’ assets.

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