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Friday, Aug. 13, 1999

Pile of bad, yakuza-tied debts awaits new RCC chief

Staff writer

Akio Kioi, who took over as president of the Resolution and Collection Corp. earlier this month, said he agreed to take the helm of the state-backed debt collection body partly because he wanted to set an example for other lawyers that an "ordinary lawyer" like himself can be as good as his predecessor, Kohei Nakabo.

Nakabo, an outspoken, high-profile lawyer, compiled an impressive record. After the RCC was created through a merger of two debt collectors on April 1, it recovered 244.7 billion yen in just three months, putting it well on pace to hit its target of 710 billion yen for fiscal 1999.

Nakabo, who served as head of the Housing Loan Administration Corp., which was merged with the state- backed Resolution and Collection Bank to create the RCC, retired from the RCC on Aug. 2, his 70th birthday.

"Mr. Nakabo was something of a genius," Kioi, 65, said in an interview at RCC headquarters in Nakano, Tokyo. "If I had turned down his request to take over his post, people would have thought the achievements are only attributable to his unique caliber. I want to demonstrate that an ordinary lawyer like me can do a good job if he does his best."

His comment reflects the strong sense of responsibility he feels as former chairman of the Japan Federation of Bar Associations, a position Nakabo also held.

It also reflects Kioi's modest assessment of his own abilities. His responsibilities, however are far from modest, since the RCC's tasks are more diversified and complicated than in his predecessor's days.

HLAC took over huge bad loans left behind by seven failed "jusen" mortgage lenders since its establishment in July 1996. The RCB took over operations -- including loan collection -- of 45 failed banks and credit unions when it merged with HLAC.

As for the former "jusen" bad loans, 1.7 trillion yen out of the 4.1 trillion yen total has been collected from borrowers of the mortgage lenders, with 2.4 trillion yen still outstanding.

By the end of June, however, the number of failed financial institutions that have dumped sour loans on the RCC swelled to 51. And 37 more -- including the Long-Term Credit Bank of Japan, Kokumin Bank and Kofuku Bank -- are expected to give problem loans to the RCC in the near future.

The RCC also plans to buy nonperforming loans from healthy banks, as many of the major banks that received injections of public money for recapitalization in March are poised to dispose of more bad loans.

For the first round of bad loan selloffs, to be made in time for firms' midyear earnings reports due out in the fall, 39 financial institutions have applied to sell the RCC sour loans worth 220 billion yen.

While admitting that the figure is smaller than he had earlier imagined -- Nakabo has said the RCC wants to eventually buy some 10 trillion yen worth of sour loans -- Kioi expressed confidence that more offers will come next time.

Experts say expectations for the RCC are high within the financial industry. An official for a major Japanese bank, who declined to be named, said that many banks are left with loans that they can't take anywhere else but the RCC, because of the loans' links to gangsters. He said they are bringing only a fraction of their bad loans to the RCC this time because they are not sure of the RCC's pricing rules.

In cases involving mobsters, the RCC is seen to have an edge over other purchasers of bad loans because it can use special investigative powers given to the Deposit Insurance Corp. By specializing in the recovery of loans no one else would dare chase down, the RCC wants to avoid competing with private debt collectors, RCC officials have said.

Kioi said the success of the RCC will ultimately hinge on how much its rank-and-file members can improve their debt-collecting skills.

"Now that our work has become more complex, it takes not just extraordinary leadership of one person but consolidated efforts by the entire organization to make us succeed," he said.

One of the biggest difficulties Kioi faces is how to divide the time and workload of RCC's 2,600 employees as new jobs keep pouring in at an unpredictable pace.

"Those loans (from recently failed financial institutions) come to us not at once, but intermittently and from all over Japan," Kioi said. "It's hard to tell how much work we will have when."

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The Japan Times

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