Statement by the Prime Minister Obuchi--Temporary Nationalization of the Long-Term Credit Bank of Japan, Ltd.

(Provisional translation)
October 23, 1998
Prime Minister's Office
The Government of Japan

Statement by the Prime Minister Obuchi

Temporary Nationalization of the Long-Term Credit Bank of Japan, Ltd.

1. Today I received a report based on Article 68-2 of "The Law concerning Emergency Measures for the Revitalization of the Functions of the Financial System"("the Law") from the Long-Term Credit Bank of Japan, Ltd. (LTCB) which indicated that "it is deemed that there is a possible danger that, in light of the bank's business and financial conditions at present, the bank will be forced to suspend repayment of its obligations including deposits."

2. Based on the LTCB's report and its financial condition, I, as Prime Minister acting on behalf of the Financial Revitalization Commission until its establishment, have decided to place the LTCB under special public management (temporary nationalization) from today in accordance with Article 36 of the Law. In this regard, I have also decided to acquire the issued shares of the LTCB through the Deposit Insurance Corporation pursuant to Article 38 of the Law.

(Note) The Financial Revitalization Commission will be established in December, and will assume such responsibilities as financial crisis management under the Law.

3. After the commencement of special public management, the nationalized LTCB will continue its normal operations. In accordance with the Law, however, the LTCB will be subject to special procedures for banks placed under temporary nationalization, including the appointment of a new board of directors, the formulation/approval of a sound credit policy and restructuring plans, and the determination of the share price. The Commissioner of the Financial Supervisory Agency issued to the LTCB, immediately after receiving the bank's report mentioned above, a management improvement order based on Article 26 of the Banking Law, with a view to preventing the deterioration of the quality of the LTCB's assets. Thus, the LTCB is required to manage its business in a sound manner even before the appointment of its new board of directors.

4. Furthermore, the Deposit Insurance Corporation is to provide the nationalized LTCB with the funds necessary for its daily operations and is to offer special financial assistance, according to the Law. As a result, all deposits taken, bank debentures issued, and interbank transactions as well as derivatives transactions conducted by the LTCB, including its overseas branches, are to be settled orderly according to their due dates, and these obligations are to be protected fully. Those loans which have been provided by the LTCB to sound borrowers in good faith are also to be maintained. Therefore, depositors and market participants are strongly urged to be reassured and remain calm.

5. The Government will continue to take all possible measures to protect depositors and others, to maintain orderly financial system, and to stabilize the financial markets at home and abroad.