Tokyo Sowa Bank announced Friday that its capital-to-asset ratio had fallen to 2.4 percent -- well below the regulatory threshold of 4 percent -- at the end of March.
The second-tier regional bank said the drop became apparent after the bank boosted loss reserves for its bad loans to 107 billion yen, up 42 billion yen from the previous plan.
It also revised its earnings projections downward for fiscal 1998 to March 31, and now expects pretax losses of 69.2 billion yen, much larger than losses of 24.3 billion yen projected March 1.
Vice President Masatoshi Fukui told a news conference that the bank, with deposits totaling some 2.2 trillion yen, may be able to boost its capital base through a possible tieup with a foreign firm.
Tokyo Sowa needs to raise some 30 billion yen to increase its capital-adequacy ratio to the threshold.
The bank will soon sign a financial advisory contract with a major foreign financial institution, Fukui said, refraining from disclosing the firm's name.
If the bank's attempt to raise funds by itself fails, it will apply for injection of public funds, Fukui added. Banks operating domestically are required to meet a capital-adequacy ratio of 4 percent by bank regulators.