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08.03.12002, 17:09
Japan s Chubu Bank files for bankruptcy
By Bayan Rahman in Tokyo
Published: March 8 2002 11:28
Chubu Bank, a secondary regional Japanese bank, filed for bankruptcy on Friday after it failed to raise enough capital to meet standards set by regulators.
The bank saw a decline in deposits last year, reflecting the trend among Japanese savers to move their bank deposits out of fragile institutions before April when the government weakens its blanket guarantee for depositors.
Chubu s failure follows the collapse of 54 credit unions over the past 15 months and that of Ishikawa Bank, another second-tier regional bank, in December.
Chubu and Ishikawa are two of five such banks that have undergone a special inspection by the financial services watchdog since October.
The bank s failure underlines the strain on regional institutions, which are less able to weather Japan s weak economy and to maintain adequate reserves against non-performing loans.
It also highlights the quiet shake-up of Japan s smaller banks by the Financial Services Agency, the industry regulator, and the sector s fragile status. "The clean-up of Japan s banking system is going on behind the scenes," said Brian Waterhouse, analyst at HSBC Securities.
The FSA had twice ordered Chubu to improve its capital position in the past two months after the watchdog forced the bank to revise down its capital adequacy ratio to 2.6 per cent, below the 4 per cent minimum for domestic banks.
Mr Waterhouse estimates that more than 20 regional and second-tier regional banks have inadequate loan-loss reserves against potential bad loans. "Chubu won t be the last of the banks to file for (bankruptcy) protection with the FSA," Mr Waterhouse said.
Both Chubu and Ishikawa have failed to find buyers and will be folded into the a "bridge bank", to be established this month, that will take on the business of failed institutions and protect deposits and liabilities.
Concern about the weak economy is also having an impact on
the capital position of insurance companies, prompting a credit rating agency to warn that it might downgrade some leading companies.
Moody s Investors Service on Friday placed five non-life insurers and a reinsurance firm on review for a possible downgrade. The companies include Tokyo Marine and Mitsui Sumitomo Insurance.
Moody s cited the growing risks associated with the recent erosion of the companies capital position and the challenges they face with ongoing deregulation and mergers.
By Bayan Rahman in Tokyo
Published: March 8 2002 11:28
Chubu Bank, a secondary regional Japanese bank, filed for bankruptcy on Friday after it failed to raise enough capital to meet standards set by regulators.
The bank saw a decline in deposits last year, reflecting the trend among Japanese savers to move their bank deposits out of fragile institutions before April when the government weakens its blanket guarantee for depositors.
Chubu s failure follows the collapse of 54 credit unions over the past 15 months and that of Ishikawa Bank, another second-tier regional bank, in December.
Chubu and Ishikawa are two of five such banks that have undergone a special inspection by the financial services watchdog since October.
The bank s failure underlines the strain on regional institutions, which are less able to weather Japan s weak economy and to maintain adequate reserves against non-performing loans.
It also highlights the quiet shake-up of Japan s smaller banks by the Financial Services Agency, the industry regulator, and the sector s fragile status. "The clean-up of Japan s banking system is going on behind the scenes," said Brian Waterhouse, analyst at HSBC Securities.
The FSA had twice ordered Chubu to improve its capital position in the past two months after the watchdog forced the bank to revise down its capital adequacy ratio to 2.6 per cent, below the 4 per cent minimum for domestic banks.
Mr Waterhouse estimates that more than 20 regional and second-tier regional banks have inadequate loan-loss reserves against potential bad loans. "Chubu won t be the last of the banks to file for (bankruptcy) protection with the FSA," Mr Waterhouse said.
Both Chubu and Ishikawa have failed to find buyers and will be folded into the a "bridge bank", to be established this month, that will take on the business of failed institutions and protect deposits and liabilities.
Concern about the weak economy is also having an impact on
the capital position of insurance companies, prompting a credit rating agency to warn that it might downgrade some leading companies.
Moody s Investors Service on Friday placed five non-life insurers and a reinsurance firm on review for a possible downgrade. The companies include Tokyo Marine and Mitsui Sumitomo Insurance.
Moody s cited the growing risks associated with the recent erosion of the companies capital position and the challenges they face with ongoing deregulation and mergers.
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