Fukushima Bank said Tuesday it has been ordered by the Financial Services Agency to undertake prompt corrective action to boost its capital and improve its operations.
The FSA's move comes after the regional bank revised downward its earnings and capital adequacy ratio for the fiscal first-half to Sept. 30.
It is the first time that the FSA has ordered a bank to take prompt corrective action since September 2000, when an order of this kind was issued to Senshu Bank, a regional bank based in Osaka.
In its revised earnings report released the same day, Fukushima Bank said its capital adequacy ratio stood at 1.71 percent on an unconsolidated basis, down from the previously announced 4.26 percent, and 2.26 percent on a consolidated basis, down from 4.51 percent.
The revised capital ratios were well below the 4 percent threshold required of banks that operate domestically.
Fukushima Bank said the downward revision was inevitable after increasing loan-loss charges to 18.2 billion yen for its interim earnings -- 9.8 billion yen more than previously reported -- following the FSA's inspection in October.
But the bank will be able to raise its capital adequacy ratio to more than 5 percent on both a consolidated and unconsolidated basis after it implements its plan to issue new shares worth 15 billion yen by the end of March, it said.
The bank has already secured capital subscriptions worth 13 billion yen to date, it said.
Fukushima Bank said it will also try to cut costs by slashing more jobs, asking directors to give up retirement benefits, and cutting ordinary employees' salaries an average of 25 percent.
In its revised unconsolidated earnings report, the bank said it posted pretax losses of 17.06 billion yen for the fiscal first half -- up from losses of 7.19 billion yen -- and net losses of 16.83 billion yen against earlier reported losses of 6.95 billion yen.