Shinginko bank of Tokyo in crisis

by Richard Kilner

Story link: Shinginko bank of Tokyo in crisis

Since its founding three years ago by Tokyo’s governor, Shintaro Ishihara, the Shinginko Tokyo has accumulated enormous losses culminating in its present crisis.

Ishihara established the bank to fulfil an election promise, but just three years later an injection of 40bn yen of additional capital is being sought.

The metropolitan assembly will approve or deny the request for more capital, submitted by the metropolitan government.

At the bank’s creation it was given 100bn yen of capital in a move supported by every party, save the Japanese Communist Party.

Given their past decisions, only the Japanese Communists are not in a tricky situation when deciding whether or not to approve the capital injection.

It is unclear, at present, what the future holds for the beleaguered bank.

Originally the bank was established to assist small firms that were denied loans from commercial banks, with a three year target to become profitable.

However, due to lacklustre screening of loan applicants, profitability has not been achieved.

The losses the bank has accrued now count for four-fifths of its 118.7bn yen capital.

The 40bn yen capital plans have been criticised for lack of clarity and evidence of how the bank will be turned around, both by industry analysts as well as members of the metropolitan assembly.

Ishihara has given assurances that the plan will work, though he has failed to provide concrete evidence of his belief.

Should the plan be rejected the bank is predicted to go bust by mid-2009, leaving Ishihara’s governorship ina precarious position.