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Monday, July 19, 2010


Bank wanders off the path

As an adviser to the Finance Services Agency and to Mr. Heizo Takenaka, who was the financial services minister during the Koizumi administration, Mr. Takeshi Kimura was deeply involved in the nation's financial policies related to the disposal of bad loans and the introduction of strict audits of financial institutions.

So, it is ironic that Mr. Kimura, former chairman of Incubator Bank of Japan, together with the bank's president, Mr. Tatsuya Nishino, and three others, was arrested Wednesday on suspicion of obstructing an FSA audit of the bank.

Mr. Kimura is suspected of instructing subordinates to delete some 280 e-mails from the bank's computer servers between June 2009 and March 2010, in violation of the Banking Business Law, in order to prevent the FSA from learning about the bank's operations and financial conditions.

At the initiative of Mr. Kimura, a former official of the Bank of Japan, Incubator Bank was set up in 2004 with the aim of offering loans to small and midsize firms, charging interest rates slightly higher than what large banks charged while, in principle, not requiring security. But later, after large banks became more positive about providing loans to small and midsize firms, the business of Mr. Kimura's bank did not go well.

To tide itself over, around 2007 the bank started buying loan claims held by SFCG Co., a moneylender now bankrupt. These transactions helped both SFCG and Incubator Bank. SFCG, suffering from the effects of subprime loans problems, received working funds while the bank charged SFCG commission fees. The FSA views the commission fees as interest, and says the bank charged SFCG the equivalent of a 45.7 percent annual interest rate, in violation of the Capital Subscription Law, which caps interest rates at 29.2 percent.

This shows how Incubator Bank, whose original aim was to help small and midsize firms that found it difficult to get loans from large banks, acted like a loan shark. Investigators should piece together the total picture of suspected crimes and find out what went wrong with the bank.

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