The Tokyo Metropolitan Assembly's finance committee voted Thursday in favor of an ordinance bill to levy a size-based corporate tax on major banks operating within the metropolis.

The committee members unanimously voted to support a draft ordinance that will place a tax of up to 3 percent on banks with net assets of 5 trillion yen or more. The bill is expected to clear the full assembly on March 30 in time for its introduction in fiscal 2000, which starts April 1.

The move comes after a month of deliberations within the assembly that included questions posed to Tokyo Gov. Shintaro Ishihara and testimony from Katsuyuki Sugita, chairman of the Japanese Bankers Association.

Prior to the deliberations, the assembly's major political parties had already declared they were in favor of the plan.

Tax revenues from many of the nation's banks have fallen in recent years as banks accelerate their disposal of bad loans, a move that resulted in a decrease in their net profits taxable under the current taxation scheme.

But the metro government plan calls for taxing banks based on gross profits -- before they subtract personnel and operational expenses and costs for bad-loan disposal from their earnings -- to ensure stable tax revenues from those banks.

The new taxation system would bring 110 billion yen a year for five years to Tokyo's cash-strapped coffer.

Sugita has said the bankers association is considering suing the metro government on the grounds that the tax ordinance violates the principle of equality under the law.

Tokyo sells securitiesThe Tokyo Metropolitan Government on Thursday procured 67.99 billion yen on behalf of 1,671 small firms operating in the metropolis by issuing a new type of securities.

The securities, known as collateralized loan obligations, impose higher interest burdens than those associated with conventional loans on participating firms, but help them procure collateral-free funds.

Backed by a lending-pool of Fuji Bank and 11 other banks, the CLOs give each participating firm up to 50 million yen in three-year loans that carry a 3.14 percent interest rate.

"This is practice for launching a real bond market," said Yoshihiko Tsuboyama, an official of the Bureau of Labor and Economic Affairs.

The launch of the CLOs is the first by a local government and represents the first step toward Tokyo Gov. Shintaro Ishihara's pledge of establishing a bond market for small and medium-size firms.

The procured amount of nearly 68 billion yen is over six times initial projections.

CLOs are attracting strong demand from institutional investors because they yield 1.13 percent, a level that is higher than what time deposits offer, metropolitan officials said.