KAGOSHIMA (Kyodo) Minami Nippon Bank said Wednesday that it is thinking of applying for a public bailout, becoming the second bank to take advantage of new legislation allowing the government to use taxpayer money to strengthen wobbly banks.
The regional bank based in Kagoshima Prefecture is likely to ask the Financial Services Agency in February to inject several billion yen into its capital base, which has been eroded by large evaluation losses on its securities holdings amid the global financial crisis, according to the sources.
Minami Nippon Bank will consider reinforcing its capital base to help "vitalize the regional economy through a stable and smooth supply of funds to small and midsize companies and other clients," it said in a statement.
On Monday, Sapporo Hokuyo Holdings Inc., a Hokkaido-based financial institution, announced plans to apply for public funds based on the revised financial functions enhancement law.
Minami Nippon Bank also decided to convene an extraordinary shareholders' meeting in mid-March so it can change its articles of incorporation to allow it to issue preferred shares without voting rights to the government in exchange for the public funds injection, bank officials said.
Minami Nippon Bank logged a group net loss of ¥4.35 billion in the April-September first half of fiscal 2008. Its capital adequacy ratio stood at 7.07 percent, above the minimum 4 percent required for banks engaging in domestic-only operations. But the ratio might fall further when the fiscal year ends March 31, due to stock market doldrums, the sources said.
The bank had deposits totaling ¥610 billion as of Sept. 30, with the ratio of bad loans to its overall loan balance standing at 3.83 percent.
Other financial institutions, particularly regional banks, may also seek public funds.