The Long-Term Credit Bank of Japan, which has returned to private management after being under state control, is interested in taking over the operations of the failed Tokyo Sowa Bank, its top executive said Tuesday.

Masamoto Yashiro, chairman and chief executive officer of the bank, told a news conference that the bank is studying the possibility of buying Tokyo Sowa, a Tokyo-based second-tier regional bank that went under and was placed under state control in June 1999.

"Tokyo Sowa has done well in businesses targeting individuals," Yashiro said. "It was the first Japanese bank to offer 24-hour telephone banking services and a year-round ATM hookup."

He added, however, that no specific negotiations are in progress.

Yashiro noted that, if realized, the buyout would help the LTCB, which currently has only 24 branches, to expand its foothold in retail operations. Tokyo Sowa has about 100 branches, mostly in the Tokyo metropolitan area.

The former Japan representative of Citibank also said that there are "more options" now for expanding LTCB branches. The LTCB itself was taken over by a group of foreign investors earlier this month after months of state control.

Japanese banks which plan to consolidate might be interested in selling some of their branches to the LTCB in the process of closing down overlapping offices, he said.

Public funds for LTCB

The government's Financial Reconstruction Commission formally approved Tuesday capital injections of public funds for the Long-Term Credit Bank of Japan and Hokkaido Bank.

The FRC said the government-backed Deposit Insurance Corp. will purchase 240 billion yen in convertible preferred shares to raise the LTCB's capital-adequacy ratio and buy 45.03 billion yen in unsecured convertible bonds to raise Hokkaido Bank's capital-adequacy ratio.

The LTCB, which was purchased on March 1 from the government by a group of financial companies led by Ripplewood Holdings LLC of the U.S., said it plans to repay the public funds in seven years.

Hokkaido Bank said it plans to repay the funds it received in around 10 years.

Under a restructuring program, which was required in order to obtain the public funds, the LTCB plans to begin paying dividends on its common and preferred stocks in fiscal 2000, ending March 31, 2001.

However it will need to gain the approval of the FRC if it wants to increase dividend payments so that such increases will not affect the repayment of public funds.

The LTCB will also be obliged to stop dividend payments if it fails to meet its earnings targets indicated in the restructuring plan or if there is concern that the bank may not be able to repay taxpayers' money.

The LTCB has indicated it would curb dividend payments to build up retained earnings and funds for investments.