OSAKA (Kyodo) Kiyo Bank, a regional based in Wakayama Prefecture, is planning to apply for a public injection of 20 billion yen to 30 billion yen in September under the government’s bank recapitalization program, sources said Tuesday.
Kiyo Bank, which will absorb Wakayama Bank on Oct. 10, intends to use the funds to shore up its capital and strengthen investment related to information technology, the sources said. Both banks are under the umbrella of Kiyo Holdings Inc.
Kiyo Bank will file an application with the Financial Services Agency under a law designed to offer financial support to regional banks undergoing reorganization.
Howa Bank, a second-tier regional based in Oita Prefecture, plans to apply to the FSA in September for 9 billion yen.
The law took effect in August 2004 and will expire March 31, 2008. No bank has applied for the public funds under the law yet.
In a statement Tuesday, Kiyo Holdings President Hiroomi Katayama said no decision has been made and described an application for public funds “one of the options” the bank may take.
Kiyo Bank and Wakayama Bank set up Kiyo Holdings in February. The move was Kiyo Bank’s efforts to help struggling Wakayama Bank deal with bad loans.
Their combined capital adequacy ratio stood at 8.64 percent at the end of March, while the ratio of their combined bad loans to overall loans came to 7.39 percent.
Kiyo Holdings is aiming to boost the capital ratio to at least 10 percent and lower the bad-loan ratio to the 4 percent level by March 2009.
A senior FSA official who asked to remain anonymous said that other regional banks may seek an application of the law because the financial sector is changing rapidly.
Executives of the banks that receive public funds under the law do not have to step down if the banks promote corporate reorganization that includes mergers and selloffs of operations.
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