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Thursday, Feb. 21, 2008


Shinginko Tokyo asks for more money

Staff writer

Troubled small and medium-size business lender Shinginko Tokyo said Wednesday it has asked the Tokyo Metropolitan Government for a capital injection of ¥40 billion to counter mounting losses from borrower defaults.

In its medium-term business plan unveiled the same day, the metropolitan government-backed bank — the brainchild of Gov. Shintaro Ishihara — set a new target of reaching the black by the end of fiscal 2011, two years later than stated in the previous plan compiled in June.

The bank said it expects to post a net loss of ¥12.6 billion in the business year to March and book about ¥100 billion in accumulated losses.

Its nonperforming loans account for 11 percent of its total lending — a ratio far higher than the 2.5 percent nationwide average among banks.

It said it will slash the number of employees from the current 450 to 120 by March 2012 and reduce the number of offices from six to one by March 2009.

Shinginko Tokyo CEO Ryuichi Tsushima, a former metropolitan government official who took over the post in November, blamed former executives for the bank's woes.

"According to our internal investigation, there was an atmosphere (within the bank) of tolerating defaults," Tsushima said. "It has become clear that they were running the bank in a thoughtless manner."

Tsushima said he will consider legal and other measures against the bank's former management team. Yasumasa Nishi, a former Toyota Motor Corp. executive who resigned as the bank's chief last June, is believed to top the list of those under threat of action.

Later in the day, Ishihara, who initiated the creation of the bank in 2005, submitted a supplementary budget to the metropolitan assembly to cover the fresh funding for Shinginko Tokyo.

Attempting to drum up assembly support for the plan, Ishihara asserted that loans from the bank have helped turn around roughly 9,000 small and medium-size firms in Tokyo.

Speaking to reporters later, Ishihara ruled out allowing the bank to fail, saying its collapse would saddle Tokyo taxpayers with at least an additional ¥100 billion burden.

Nevertheless, Ishihara, who previously gave assurances that no more taxpayer money would be needed for the bank, is expected to face resistance within the assembly.

"We believe Ishihara bears a grave responsibility," said Yasunobu Watanabe, leader of the Japanese Communist Party's assembly membership. "An additional capital injection by Tokyo is simply a waste of taxpayers' money."

Watanabe said Shinginko Tokyo should simply shut down its operations, recognizing it has no prospects of turning its business around while carrying nearly ¥100 billion in accumulated losses.

Shinginko Tokyo was set up to help finance small and medium-size companies in the nation's capital that found it hard to secure loans from other banks. But Watanabe said he sees no reason it should stay afloat now that major banks have started to lend money to those firms.

Democratic Party of Japan members in the metropolitan assembly have also said Shinginko Tokyo should come up with a drastic reform plan, including selling its operations to private firms.

Established with ¥100 billion in capital from the metropolitan government, the bank opened its doors in April 2005.

But the bank has languished in the red ever since, caught between offering relatively high rates of return on deposits while extending low-interest loans to its customers. As of the end of September, it had cumulative losses totaling ¥93.6 billion.

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The Japan Times

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