The nationalized Long-Term Credit Bank of Japan kept off its books 62 billion yen in loan guarantees that it promised to its affiliated moneylender, in a possible violation of the Securities and Exchange Law, financial sources said Wednesday.
The LTCB, which was placed under state control in October, did not report in its financial statements for the 1997 business year that it had promised to guarantee repayment of 62 billion yen in loans that Japan Leasing Corp. had borrowed from Dai-Ichi Mutual Life Insurance Co., the sources said.
It was previously reported that the LTCB had also guaranteed repayment of 134 billion yen in Japan Leasing’s loans from Norinchukin Bank.
In total, the LTCB provided about 196 billion yen in loan guarantees to Japan Leasing, which effectively went bankrupt earlier this year. It has been under a court-authorized rehabilitation process since the end of March.
An inspection by the Financial Supervisory Agency uncovered the loan guarantees, the sources said. The FSA is now examining whether the LTCB’s failure to report the guarantees is punishable under the Securities and Exchange Law, they said.
According to the sources, Norinchukin Bank and Dai-Ichi Life Insurance asked the LTCB around November 1997 to provide collateral for their outstanding loans to Japan Leasing.
The financial institutions took the moves on mounting concern over the LTCB’s future following the cancellation of a 200 billion yen recapitalization plan.
In January, the LTCB signed agreements with the two firms pledging loan-repayment guarantees to Japan Leasing. After the LTCB’s shares plunged in late June, the bank fulfilled its pledge by offering its securities holdings to the two firms as collateral, the sources said.
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