The head of the government’s Financial Reconstruction Commission said Tuesday that the government would allow Mitsubishi Trust & Banking Corp. to repay ahead of schedule the public funds it received to replenish its depleted capital base.
“Should the bank have such a plan, I would like to have it carried out quickly,” FRC Chairman Hideyuki Aizawa told a news conference.
The FRC can refuse the early repayment of government funds if it believes the institution in question remains unhealthy.
At a press conference last Wednesday announcing that Mitsubishi Trust and the Bank of Tokyo-Mitsubishi will come under a single holding company next April, Mitsubishi Trust President Akio Utsumi said his bank “is now holding talks with banking authorities to return as speedily as possible the public funds we received earlier.”
Mitsubishi Trust is now set to become the second bank to reimburse the government, following the Bank of Tokyo-Mitsubishi.
“It is desirable that banks repay the public funds they owe to the government after they revive their financial health as quickly as possible,” Aizawa said.
He added, however, that the government will only accept repayment on condition that it does not undermine the stability of the entire banking system nor lower the banks’ capital-adequacy ratios.
The government, which injected a total of 7.46 trillion yen into the capital bases of Japan’s 15 major banks in March 1999, put 350 billion yen into Mitsubishi Trust through sales of preferred shares and subordinated bonds to the state-run Deposit Insurance Corp.
Bank officials said some member companies of the Mitsubishi group plan to comply with a request by Mitsubishi Trust to buy the preferred shares — worth 200 billion yen — after the DIC sells them back to the group.
In addition, the bank is considering two methods of dealing with the remaining 150 billion yen in subordinated bonds. One is to buy back and retire the bonds, and the other is to get Mitsubishi group companies to buy them, they said.
In closing its parent-only books for fiscal 1999, the trust bank disposed of 121.6 billion yen in bad loans through such means as the setting-aside of 60.7 billion yen in loan-loss provisions.
The huge writeoff slashed the bank’s net profit to 52.3 billion yen. The bank was swamped with 962.6 billion yen in bad loans as of March 31 this year.
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