In response to public criticism and pressure from the Japanese government, Shinsei Bank, formerly the nationalized Long-Term Credit Bank of Japan, announced Wednesday that two U.S. consulting firms with links to members of its board will return 2.1 billion yen the bank had paid them as advisory fees.

Shinsei Bank decided that members of its parent company -- the international consortium New LTCB Partners CV -- will instead foot the 2.1 billion yen.

Ripplewood Holdings Management LLC and JCF Management LLC received 1.05 billion yen each in March for their advice on the investors' negotiations with the government over the sale of the failed LTCB.

But the deal came under growing public criticism because Shinsei's predecessor -- the LTCB -- had received a total of 3.6 trillion yen in injections of public funds to replenish its capital base, and also because the two consulting firms are closely linked to the bank's current directors.

Ripplewood Holdings Management is effectively owned by Shinsei Bank director Timothy Collins, and JCF Management is controlled by another Shinsei director, Christopher Flowers.

A Shinsei Bank spokesman said the latest decision was made in response to public criticism of the deal, but defended the agreement as legitimate, saying such practices are common in western countries.

The spokesman also said the bank does not plan to review another deal in which the bank paid New LTCB BV, the Netherlands-based parent company of New LTCB Partners, 2.69 billion yen for legal and accounting work related to the purchase of the bank.

In addition, the bank said it has no plans to review a total of 120 million yen it has paid to Ripplewood Holdings Management and JCF Management for their management advice following the bank's transfer to the ownership of the international consortium, nor the 820 million yen it has spent to contract the two firms to pay for their advice in the future.

In total, the bank has concluded contracts worth 5.7 billion yen with the three firms.

The LTCB, which was put under state control in 1998, was bought by New LTCB Partners, a consortium led by U.S. investing firm Ripplewood Holdings LLC.

Financial Reconstruction Commission Chairman Hideyuki Aizawa, speaking before the House of Representatives Budget Committee, also said the 2.1 billion yen will be returned to Shinsei Bank.

Aizawa said the bank "voluntarily" reached the decision after the FRC asked it to review the legitimacy of the lavish fees paid by a bank that received public funds to replenish its capital base.