Prime Minister Keizo Obuchi launched the Financial Reconstruction Commission Tuesday by appointing five members to deal with the collapse of financial institutions and to resuscitate the nation’s troubled banking sector.

The commission, headed by Financial Reconstruction Minister Hakuo Yanagisawa, was formed in accordance with the Financial Reform Law enacted in October and will be given authority to deal with bank failures and to examine bad loan-laden financial institutions that apply for public funds.

Yanagisawa said his first priority is Nippon Credit Bank, which the government nationalized on Sunday. “We must select the bank’s new management team as soon as possible,” he said.

The government placed NCB under temporary state control after concluding that it had a capital deficit of 94.4 billion yen at the end of March. In addition to dealing with NCB, the commission also will have to promote further restructuring and secure necessary funds for the Long-Term Credit Bank of Japan, which was nationalized in October. It also will be tasked with finding prospective buyers for the two banks.

The commission is composed of experts from a variety of fields: Asahiko Isobe, president of Hitachi Research Institute and a former Bank of Japan official; Tetsuya Katada, chairman of Komatsu Ltd.; Atsushi Shimizu, former chief judge of the Hiroshima High Court; and Hiroshi Nakachi, chairman of the Japanese Institute of Certified Public Accountants.

The commission, which will oversee the Financial Supervisory Agency, will also be in charge of examining banks’ plans to solve their bad loan problems and determine the amount of public funds to be allotted. Yanagisawa said that although the commission is an independent body, it will have to work closely with the Bank of Japan and Deposit Insurance Corp. to shore up the nation’s banking sector.

However, most commission members will not work full time, and some observers are concerned that the commission may lack the ability to make quick decisions in dealing with emergency situations.

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