The government on Tuesday approved an application by Resona Bank for 1.96 trillion yen in public funds, government officials said.
The funds will be injected into the depleted capital base of the core bank of Resona Holdings Inc.
The endorsement constitutes a step toward bringing Resona Holdings under virtual government control through a planned share swap plan, under which the bank's shares will be exchanged for those of the holding company.
To effect the injection, the government will purchase 5.6 billion Resona Bank common shares, worth 280 billion yen, and the bank's 8.4 billion preferred shares, worth 1.68 trillion yen.
Because the shares will be swapped with those of Resona Holdings, the government will hold more than 70 percent of the voting rights in the holding company, according to the sources.
Resona Bank applied for the injection May 30 after the government announced May 17 that it would replenish the bank's capital base. Resona Bank's capital-adequacy ratio fell below the 4 percent minimum required for banks operating domestically.
The injection will likely raise Resona Holdings' group capital-adequacy ratio to 11.9 percent, Financial Services Minister Heizo Takenaka said earlier. Resona Bank said its group capital-adequacy ratio will likely come to 12.2 percent as a result of the injection.
Resona's new management team will be responsible for operations, under strict monitoring by the Financial Services Agency.