Defective bank plan led to large amounts of bad loans

Japan Press Weekly

Japan Press Service Co., Ltd. is the only news agency providing information of progressive, democratic movements in Japan

Defective bank plan led to large amounts of bad loans

The Japanese Communist Party in the Tokyo Metropolitan Assembly demanded that the metropolitan government cancel an additional capital injection of 40 billion yen into ShinGinko Tokyo, a bank launched three years ago at the initiative of Tokyo Governor Ishihara Shintaro.

At a metropolitan assembly committee meeting on March 17, JCP representative Shimizu Hideko took up the question of defects in the plan for a new bank drawn up in 2004 and criticized Governor Ishihara for shifting the blame for the bank’s failure onto former management executives. She said, “The former management was just running on the rails the governor laid.”

To achieve the plan’s goal of generating a surplus in three years, ShinGinko Tokyo offered high interest rates on deposits in order to attract more depositors and expanded loans without rigorous assessments of borrowers.

Shimizu pointed out that these policies led to bad loans amounting to 38.5 billion yen.

Shimizu also criticized the slipshod management of the bank, citing an example that it had spent 50 billion yen for operating expenses but created only 26 billion yen in revenues for the three year period since it was established.

“Governor Ishihara and former Vice-Governor Otsuka Toshiro, currently a chair of the ShinGinko Tokyo board of directors, must be held responsible for the present crisis,” stated Shimizu.

Shimizu asked about the future outlook of net business profits, deposit and lending interest rates, and how the additional capital of 40 billion yen would be used. A metropolitan government official in charge of financing refused to respond to the question. He just said, “Because the bank does not disclose such information.”

Shimizu said, “Do you mean that we must give you a carte blanche? Tokyo residents will never accept the additional capital injection with such an irresponsible explanation.”

- Akahata, March 18, 2008