The Financial Services Agency said Thursday it has decided to hand over the operations of the defunct Ishikawa and Chubu banks to the Bridge Bank of Japan, a government-run acquisition entity charged with temporarily assuming the assets and deposit liabilities of failed banks.
The measure ensures that deposits and other liabilities at the two failed regional banks will be fully protected, the FSA said in a statement.
The bridge bank will be funded by sizable cash grants from state-run Deposit Insurance Corp.
Under the Deposit Insurance Law, the cash grants will cover loan losses of the failed banks to enable the bridge bank to fully protect deposits.
The FSA said it will help the bridge bank find buyers after the two are temporarily put under the bridge bank's administration.
Ishikawa Bank filed for insolvency proceedings in December with the FSA, which immediately appointed three administrators to take charge of the bank.
On March 8, Chubu Bank filed for the same proceedings.
Since the administrators could not find a private acquiring financial institution to take over the two banks, they asked the FSA to transfer their operations to the Bridge Bank of Japan.
The bridge bank acquired its banking license on March 19, with the DIC putting up 100 percent of its 2.05 billion yen capital.