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The government-backed Development Bank of Japan plans to provide Hokkaido Bank and North Pacific Bank with ¥10 billion in subordinated loans to increase the regional banks’ lending capacity, industry sources said Friday.

Hokkaido Bank, owned by Hokuhoku Financial Group Inc., received ¥45 billion in public funds in the year to March 2000. North Pacific Bank, a subsidiary of Sapporo Hokuyo Holdings Inc., is set to get ¥100 billion in public funds soon under the financial function enhancement law revised last year.

The public funds for the government’s purchases of preferred shares can be counted into Tier 1 capital, while the DBJ’s subordinated loans can be included into Tier 2 capital.

The public fund injections and subordinated loans are designed to expand the banks’ capital, on which their lending capacity depends.

With the recession deepening, financial entities have tightened their lending conditions, sending businesses, particularly small and midsize firms, into difficulties in facilitating operating funds.

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