The Financial Services Agency began soliciting bids Thursday for the sale of state-owned Ashikaga Bank Ltd., publishing the conditions that buyers must satisfy to purchase the Tochigi Prefecture-based bank.

The auctioning off of Ashikaga, which the government took over in 2003, has drawn interest from a number of financial institutions, including foreign investment funds. Competition to acquire the bank is expected to be fierce.

Bidders are required to submit a plan to whip Ashikaga Bank’s books into shape by Dec. 15. The FSA will then narrow down the field and ask finalists to submit a detailed plan, selecting a winner by next summer.

According to the terms of the request for bids, the buyer must be a financial institution capable of providing high-quality management to Ashikaga.

The agency also wants bidders to maintain the regional bank’s main function — serving the needs of customers in and around Tochigi Prefecture.

The FSA said bidders also need to “assess the value of Ashikaga appropriately” by offering a bid high enough for the government to recoup the tax money it spent to bail out the bank. The government injected 135 billion yen in public funds into Ashikaga.

At a regular news conference, FSA chief Yuji Yamamoto expressed hope that many bidders apply, including foreign investment funds.

“It doesn’t matter if bidders are foreign financial institutions,” said Yamamoto. “We will select a suitable institution that can gain the trust of local customers.”

The FSA said it will not disclose the number of bidders or their names during the selection process to avoid the possibility of collusion.

Since the purchase price is expected to be extremely high, bidders are expected to team up.

At the moment, three major groups are believed to have formed so far: an alliance led Nikko Cordial Corp. and eight local banks, including Bank of Yokohama, another led by Nomura Holdings Inc. and Orix Corp., and an alliance between Tochigi Bank and Daiwa Securities Co.

Even if the bidders fail to pass the initial screening, they may form consortiums to win the bid, leading to a shuffling of alliances.

One FSA official said that as long as such consortiums do not hinder free competition, they will be allowed.

Foreign investment funds, including U.S.-based Lone Star Funds and the Goldman Sachs group, are reportedly interested in the auction.

But Tochigi Gov. Tomikazu Fukuda has expressed skepticism about a takeover by foreign investors or an alliance of megabanks, saying they “tend to seek a profit-only business and place priority on the interest of their group,” rather than the local community.

Ashikaga has recovered steadily over the past few years. In fiscal 2005, which ended on March 31, Ashikaga raked in 44 billion yen in operating profit, while its debt shrank to some 380 billion yen from 679 billion yen in fiscal 2003.

Nonperforming loans at Ashikaga mounted after the bubble economy burst in the late 1980s.

Formed in 1895, Ashikaga has about 150 branches, in Tochigi, Gunma, Ibaraki, Fukushima and Saitama prefectures, as well as Tokyo. The bank has about 2,400 employees.

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