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Tuesday, March 11, 2008

LOSSES LAID TO LAX SCREENING

Shinginko Tokyo may sue ex-managers


Staff writer

Shinginko Tokyo, the brainchild of Tokyo Gov. Shintaro Ishihara, said Monday it will consider suing its former management team, including ex-Chief Executive Officer Yasumasa Nishi, for allowing over-lenient screening that resulted in billions of yen in losses.

News photo
Shinginko Tokyo CEO Ryuichi Tsushima gestures during a news conference Monday in Tokyo. KYODO PHOTO

The position was stated in an in-house report unveiled Monday amid deliberations at the Tokyo Metropolitan Assembly on whether to approve Shinginko Tokyo's request for an additional capital injection of ¥40 billion from the Tokyo Metropolitan Government.

"Since we believe the chief executive officer held strong authority over management, that person bears greater responsibility than the others," present CEO Ryuichi Tsushima told a hastily arranged news conference.

Shinginko Tokyo was set up to help small and medium-size companies in the capital that were unable to get loans from established banks, which were under pressure to ditch heaps of nonperforming loans.

The report said too much of the bank's authority was concentrated in Nishi's hands and criticized his management as "self-righteous." Tsushima said he will consider seeking compensation from Nishi.

The bank will ask legal and accounting experts to launch another investigation on the level of responsibility the former management team bears.

"We apologize to our shareholders and Tokyoites for asking for an additional ¥40 billion in capital from the Tokyo government," Tsushima said.

According to the report, Shinginko Tokyo's nonperforming loans rose to ¥28.5 billion at the end of January.

The bank has not been able to collect debts from 2,345 companies, many of which have gone bankrupt.

Shinginko Tokyo's business deteriorated in the second half of business 2005, or soon after it opened its doors in April 2005, when the amount of loan defaults exceeded interest revenues, the report said.

But the former management hid the accumulating defaults from the board of directors, which included outside directors, and failed to tighten its screening of borrowers, the report said.

Bonuses were given to sales staff based on the amount of loans extended even when the loans were defaulted on after a certain time. This created a moral hazard among sales staff, the report said. The bank carried out an in-house probe between last July and this month on its management from April 2005 to last June.



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