Fresh Embarrassment for Japan Over Nippon Credit Bank Sale
August 19, 2000 - 0:0
TEHRAN The Japanese government's troubled sale of Nippon Credit Bank Ltd. (NCB) hit fresh controversy Friday as a report alleged it had masked the failed lender's bad loan problems to its buyers.
The state Financial Reconstruction Commission (FRC) had wrongly classified bad and risky loans totaling 345.8 billion yen ($3.2 billion) as healthy assets in the sale contract for NCB, AFP quoted the Sankei Shimbun as reporting.
But the apparent mistake could backfire on the government after the September 1 sale of NCB to a consortium led by Japan's top Internet investor, Softbank Corp., the conservative newspaper noted.
As a condition for the 101-billion-yen sale, the consortium extracted a promise that the state would buy back any NCB loans which fell in value by more than 20 percent.
That clause in the contract was mirrored in the February sale of another failed and nationalized bank, Long-Term Credit Bank of Japan Ltd. (LTCB), which was at the center of the collapse of retailer Sogo Co. Ltd. in July.
LTCB, reborn as Shinsei Bank, offloaded bad Sogo debt to the government which then announced it would write off nearly half the 200-billion-yen amount. That sparked a public outcry and Sogo was forced into bankruptcy.
"The clause demanding the state buy back debts is also included in the sale contract for NCB," the Sankei Shimbun said.
"If 'a second Sogo' occurs, it could lead to an increased burden on taxpayers." The FRC defended itself over its appraisal of NCB's debts.
"All we can say is that we conducted the assessment properly based on our own standards," FRC spokesman Masahiko Hasegawa told AFP.
"But as we cannot confirm details over the documents, we have no comment," he added.
The bad loans were lent to companies which had later either collapsed or were at risk of going under, the newspaper quoted a leaked FRC document as saying.
"The internal document over asset assessment showed the definition of appropriate assets' was given to bad loans worth 345.8 billion yen, which were extended to borrowers which should have been disqualified," it said.
A total of 488 disqualified companies were wrongly classed as qualified borrowers, the conservative daily said.
Prime Minister Yoshiro Mori Tuesday approved the Softbank-led group's purchase of NCB, after it was delayed by a month from August 1 to give the government more time to explain itself over the Sogo mess.
The state Financial Reconstruction Commission (FRC) had wrongly classified bad and risky loans totaling 345.8 billion yen ($3.2 billion) as healthy assets in the sale contract for NCB, AFP quoted the Sankei Shimbun as reporting.
But the apparent mistake could backfire on the government after the September 1 sale of NCB to a consortium led by Japan's top Internet investor, Softbank Corp., the conservative newspaper noted.
As a condition for the 101-billion-yen sale, the consortium extracted a promise that the state would buy back any NCB loans which fell in value by more than 20 percent.
That clause in the contract was mirrored in the February sale of another failed and nationalized bank, Long-Term Credit Bank of Japan Ltd. (LTCB), which was at the center of the collapse of retailer Sogo Co. Ltd. in July.
LTCB, reborn as Shinsei Bank, offloaded bad Sogo debt to the government which then announced it would write off nearly half the 200-billion-yen amount. That sparked a public outcry and Sogo was forced into bankruptcy.
"The clause demanding the state buy back debts is also included in the sale contract for NCB," the Sankei Shimbun said.
"If 'a second Sogo' occurs, it could lead to an increased burden on taxpayers." The FRC defended itself over its appraisal of NCB's debts.
"All we can say is that we conducted the assessment properly based on our own standards," FRC spokesman Masahiko Hasegawa told AFP.
"But as we cannot confirm details over the documents, we have no comment," he added.
The bad loans were lent to companies which had later either collapsed or were at risk of going under, the newspaper quoted a leaked FRC document as saying.
"The internal document over asset assessment showed the definition of appropriate assets' was given to bad loans worth 345.8 billion yen, which were extended to borrowers which should have been disqualified," it said.
A total of 488 disqualified companies were wrongly classed as qualified borrowers, the conservative daily said.
Prime Minister Yoshiro Mori Tuesday approved the Softbank-led group's purchase of NCB, after it was delayed by a month from August 1 to give the government more time to explain itself over the Sogo mess.