The 15 applicant banks for public funds said Monday they will write off 9.3 trillion yen in sour loans for fiscal 1998, ending this month, in an attempt to end the bad-loan problem.

Most of the chief bankers acknowledged their management responsibility in relying on public funds. They said their task now is to enact restructuring plans, including reductions in personnel and the number of branches, in return for the public money.

The Financial Reconstruction Commission met separately with each chief earlier in the day to confirm their commitments in the final step before it approves the capital injection totaling 7.46 trillion yen on Friday.

The amount of writeoffs is larger than that in the initial plan announced in November due to stricter standards imposed by the government and strong pressure from the FRC.

Sumitomo Bank is writing-off 1.05 trillion yen in nonperforming loans during fiscal 1998; the amount is 990 billion yen each for Fuji Bank and Sakura Bank.

Many of the applicant banks plan massive employee cuts in the next five years. For example, Sakura plans to trim its workforce by 21 percent, or 3,500 employees, between 1999 and 2003.

Regarding the application for public funds, Dai-Ichi Kangyo Bank President Katsuyuki Sugita said, “It is indeed regrettable.” The bank’s careless lending during the bubble economy is partly responsible for the deterioration of its capital base, he told reporters after the meeting with the FRC. “We realize we were not sufficiently prepared for the dramatic decline in our asset quality, for which we feel keenly responsible,” he said.

Masao Nishimura, head of the Industrial Bank of Japan, said, “We understand that it is our utmost priority to carry out our restructuring plans,” adding he expects the bank to be able to return the money in five years.

The FRC, which for months had been pressuring the 15 banks to forge solid restructuring plans or face rejection of their requests, gave preliminary approval Feb. 12 to all the applications.

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