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The head of the semigovernmental Deposit Insurance Corp. on Friday described the proposed partial forgiveness by the DIC of loans owed by the Sogo Co. department store chain to Shinsei Bank as a “possible option.”

The DIC has not received an official request from Shinsei Bank, formerly the Long-Term Credit Bank of Japan, to buy back 200 billion yen in outstanding loans made to Sogo Co., said DIC Gov. Noboru Matsuda, who was reappointed to the post Wednesday.

Matsuda told a news conference that if Shinsei decides to exercise its right to sell its loans to Sogo to the DIC, then the DIC will examine the request “as soon as possible” and determine whether it is legitimate.

Following its collapse under the weight of bad loans in late 1998, the LTCB was nationalized. The bank’s assets, as well as some problem loans, were sold March 1 to an international consortium led by Ripplewood Holdings LLC.

A February accord between the DIC and the consortium states that Shinsei has the right to sell back to the DIC any loans whose market value falls more than 20 percent.

Sogo recently asked 72 creditor banks, including Shinsei, to forgive 631.9 billion yen in loans to help it rehabilitate itself. Sogo has asked Shinsei to waive 97 billion yen of the 200 billion yen it has borrowed from the LTCB. Sogo wants the creditor banks to approve the rehabilitation plan by the end of this month.

Matsuda said that if the DIC receives a formal application for the buyback from Shinsei, it will examine whether the value of the loan has actually fallen by 20 percent. If the request is found to be legitimate and the loan is bought back, the DIC will then consider whether to accept Sogo’s request for a debt waiver, he said.

Shinsei, which commenced operations June 5 under its new corporate name, is considering filing a formal application asking the DIC to buy the loans later this month, sources said.

Matsuda said that forgiving debt under exceptional circumstances was a possible option for the DIC. He cautioned, however, that the DIC’s top priority as a state organ would be to minimize the cost to the public.

Matsuda added that the DIC will base its conclusion on whether forgiving loans will make the collection of the remaining claims easier.