The Financial Reconstruction Commission on Friday approved the final agreement on the sale Aug. 1 of the nationalized Nippon Credit Bank to a consortium led by Internet investor Softbank Corp.

The sale of the NCB will be the second and final transfer of a nationalized bank to private-sector control, following that of the Long-Term Credit Bank of Japan, which was sold in March to a consortium led by Ripplewood Holdings LLC of the United States.

“State control of the two banks is nearly over, which should contribute to stabilizing and revitalizing the nation’s financial system,” said FRC Chairman Sadakazu Tanigaki.

The NCB was placed under state control in December 1998 after accumulating vast amounts of bad loans.

The final agreement, however, has increased the amount of public funds to be injected into the new bank by 20 billion yen from the basic agreement reached June 6, due to arbitrary management by the Finance Ministry.

The contract was signed later in the day by the state-run Deposit Insurance Corp., the NCB and the Softbank-led consortium, which includes leasing company Orix Corp. and nonlife insurer Tokio Marine & Fire Insurance Co.

The new bank will be headed by Tadayo Honma, a former executive director of the Bank of Japan. The presidents of the consortium’s three main firms, including Softbank’s Masayoshi Son, a leading light in the Internet business, will serve as directors.

The consortium will buy the NCB’s stocks for 1 billion yen and invest 100 billion yen in the new bank.

The total acquisition cost will thus be 101 billion yen.

Softbank will put up about 49 percent of the 101 billion yen and Orix and Tokio Marine will each contribute 15 percent. The rest will be shared by some 100 financial institutions, including regional banks and foreign institutions such as Lehman Brothers.

More than 3.2 trillion yen in taxpayers’ money will have to be spent to make up for the NCB’s capital deficit before the bank is sold to the consortium.

On top of this, the government will also inject 260 billion yen in public funds to the new bank by buying its preferred stocks. The amount is 20 billion yen more than earlier agreed so that the bank could cover an expected capital shortage after early repayments of debts to some 20 financial institutions.

These debts were collected in 1997, when the NCB was on the brink of collapse, at the request of the Finance Ministry. The ministry at the time was maintaining the so-called convoy system, protecting weak financial institutions even at the expense of stronger ones.

But it was later discovered that the NCB had secretly promised on paper to pay back 25 billion yen to Nippon Life Insurance Co. within three years, an FRC official said.

Other financial institutions have demanded that the NCB make similar repayments to them and the bank has decided to do so by August, the official said.

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