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The government-run Deposit Insurance Corp. spent a combined 9.05 trillion yen in the four years to March 31 to enable dozens of failed banks to fully refund depositors, the Financial Services Agency said in a report Friday.

The report was submitted to a Cabinet meeting in accordance with Article 5 of the financial system revival law.

The tally represents an increase of 150 billion yen from the corresponding sum the DIC spent in the 3 1/2 years to last July 31.

The FSA linked the 150 billion yen rise to the cost incurred in covering bad-loan losses at dozens of credit unions and “shinkin” (credit) banks that failed after mid-2001 but before April’s abolition of the government’s full-refund guarantee on time deposits at failed financial institutions.

On April 1, the government scrapped the full guarantee for time deposits in the event of a bank failure by imposing a refund limit of 10 million yen per deposit at banks.

The same limit on ordinary and checking-account deposits takes effect next April 1.

The DIC funneled the 9.05 trillion yen into several dozen banks and other financial institutions in a four-year period. between fiscal 1998 and fiscal 2001 by cashing part of a 13 trillion yen government bond that had been issued to it for the purpose.

Since the government must cash the bond whenever the DIC asks it to redeem it in installments to help failed lenders refund savers, the 9.05 trillion yen was shouldered by taxpayers, it said.

In 1996, following a series of high-profile failures of credit unions and banks, the Diet adopted legislation guaranteeing full protection to forestall panic among depositors.

Under the scheme, large official cash grants have been given to healthy banks that agreed to assume the obligation of fully refunding depositors at failed banks on demand, while also buying the failed banks.

Diets empower FSA

The Diet on Friday passed a bill into law that allows the Financial Services Agency to inspect nine governmental lending institutions beginning next April 1.

The House of Councilors endorsed the bill at a plenary session in the morning, completing the legislative process after it was passed earlier by the House of Representatives.

The legislation is aimed at utilizing the FSA’s inspection knowhow to rectify unprofitable loan and investment activities undertaken by the public lenders and improve the efficiency of their overall operations.

But the Upper House attached a resolution calling for measures to prevent the inspections from becoming inflexible and leading to a credit crunch.

The nine institutions include National Life Finance Corp.; Agriculture, Forestry and Fisheries Finance Corp.; Development Bank of Japan; Japan Bank for International Cooperation; Shoko Chukin Bank; and a new public corporation to be created to take over government-run postal services in 2003.

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