Incubator Bank files for bankruptcy, deposit protection invoked+

TOKYO, Sept. 10 Kyodo -
The Incubator Bank of Japan, whose former top manager was charged last month
with obstructing a government audit, filed for bankruptcy protection Friday,
prompting the Financial Services Agency to invoke a cap on deposit protection
for the first time since it was instituted in 1971.
Liabilities left by the bank totaled 619.4 billion yen as of March this year,
representing the third-largest debt left by a failed company so far this year,
according to credit research firm Teikoku Databank.
Financial Services Minister Shozaburo Jimi announced that the deposit
protection scheme would be invoked, a decision endorsed by Prime Minister Naoto
Kan. Under the deposit protection scheme, deposits of up to 10 million yen will
be refunded, plus interest earned.
The FSA, Japan's financial watchdog, ordered the Tokyo-based lender to small
businesses to suspend operations from Friday to Sunday and named the Deposit
Insurance Corp. of Japan as the state-appointed administrator.
Incubator Bank will resume operations at some of its outlets from Monday and
begin returning refundable deposits.
''We would like to apologize sincerely for causing this situation to
depositors, creditors, shareholders, borrowers and everyone concerned,'' said
Incubator Bank President Haruki Kohata, who took over the post the same day in
July that his predecessor was arrested along with former chairman Takeshi
Kimura, at a packed press conference.
''We started with the purpose of supporting small and medium-sized companies,
as well as micro enterprises. But at a certain point, we set a big goal of
becoming a megabank and became devoted to expanding profits,'' said Kohata, an
author who writes under the pen name Go Egami.
All of the bank's five executives, including Kohata, have decided to step down,
its sources said.
Incubator Bank had about 585.9 billion yen in deposits as of Aug. 31, of which
47.1 billion yen were from 3,560 depositors who held more than 10 million yen
each. The number of such depositors accounted for about 3 percent of the bank's
roughly 113,000 depositors.
As for deposited money in excess of the 10 million yen subject to protection,
there is a high possibility that part of the deposits will not be returned.
Top government and Bank of Japan officials played down the impact of the
failure on the country's financial system, given the bank's unique business
model of taking only time deposits and the fact that it had not joined a
nationwide system for financial settlement services between financial
institutions.
The nation's financial markets also stayed cool, with bond and stock trading
hardly affected.
''This is extremely regrettable,'' Kan told reporters in reference to the
failure of Incubator Bank. Asked about the reason for invoking the government's
deposit protection scheme for the first time, the premier said, ''We have
judged that it would not have a large impact on Japan's financial system.''
At a separate press conference, FSA chief Jimi called for calm among the bank's
clients, saying the bank's loans to healthy borrowers will be taken over by a
bridge bank.
The BOJ will also take appropriate steps including cooperating temporarily with
the deposit insurance agency's financing, Governor Masaaki Shirakawa said in a
statement.
The comments were made as some depositors gathered outside the bank's outlets.
A 79-year-old man at the Umeda outlet in Osaka said, ''I was worried but never
thought it would actually go bankrupt.'' ''Some of my money may not come
back,'' he said, looking disappointed.
Refundable deposits will be transferred to designated accounts at different
banks four to five days after depositors apply to close their accounts at
Incubator Bank. Of its 114 outlets, 16 outlets, mainly in large cities, will
resume operations from next week and the bank will also accept applications
through the mail.
Deposited money that will not be covered under the protection scheme amounted
to 11.5 billion yen. How much of the amount can be refunded will be decided
after the state-backed DIC examines the bank's asset components. The refunding
is not expected to take place within a year.
DIC said some of the bank's operations will be taken over by a bridge bank in
about eight months and that while doing so, it will look for a financial
institution to ultimately support the failed bank.
As of the end of August, the bank had 180.4 billion yen of liabilities in
excess of assets.
The bank, set up in 2004 by former BOJ official Kimura, who was a key adviser
to financial services minister Heizo Takenaka in the government of then Prime
Minister Junichiro Koizumi, filed for bankruptcy proceedings with the FSA under
the Deposit Insurance Law after an impromptu board meeting Friday morning, it
said.
The bank then filed for bankruptcy protection with the Tokyo District Court
under the Civil Rehabilitation Law to prevent losses on its assets.
Some of its operations had already been suspended from June 7 through Sept. 30.
under an FSA order citing its obstruction of an audit between June last year
and March this year, and a ''serious violation of the law'' regarding its
questionable dealings with collapsed moneylender SFCG Co.
After police raided the bank's main office and related locations in June,
Kimura was arrested in July along with Tatsuya Nishino, who headed the bank at
the time. The two were indicted last month on a charge of obstructing the FSA
inspection in violation of the banking law.
Serving as the bank's president and then chairman from 2005, Kimura stepped
down in May after the bank reported a 5.1 billion yen net loss in the year
ended in March.
Japan's financial chief Jimi said, ''Then Financial Services Minister Takenaka
cannot be exempt from moral responsibility'' for approving a banking license
for the bank, adding that there were ''unthinkable'' obstructions by the bank
toward financial regulators' investigation.
DIC is expected to pursue the responsibility of the bank's management under the
civil and criminal codes.
==Kyodo
2010-09-10 23:05:39


Delete & Prev | Delete & Next