The Deposit Insurance Corp. bought 113 bad loans worth 444.4 billion yen from Shinsei Bank between August and the end of March at a cost of 286.9 billion yen, the Financial Services Agency revealed Thursday.

During the same period, the government-run entity also bought 25 bad loans worth 33.2 billion yen from Aozora Bank at a cost of 20.9 billion yen, the FSA told a meeting attended by two financial affairs panels of the Liberal Democratic Party.

Under a contract between the government and the two banks, Shinsei Bank and Aozora Bank can ask the DIC to buy their loans if their values fall sharply as a result of bankruptcies or financial problems among relevant borrowers.

Shinsei Bank, the reborn entity of the Long-Term Credit Bank of Japan, made a fresh start under its new name in June 2000 after being sold to a U.S. investment fund. Aozora Bank was spawned by the failure and nationalization of Nippon Credit Bank.

Aozora was put under government control between December 1998 and August 2000. It was acquired in September 2000 by a consortium led by Softbank Corp., Orix Corp. and Tokio Marine & Fire Insurance Co.

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