The Tokyo District Public Prosecutors Office and the Tokyo Metropolitan Police arrested former Nippon Credit Chairman Hiroshi Kubota, former President Shigeoki Togo, and former Vice President Tadao Iwaki and three others, the person said, asking not to be named. Police officials weren't available to comment.

The executives had resigned from the bank last year after the government deemed it too troubled to continue operating as a private entity and forced it into state control.

Friday's arrests support widely held suspicions that Japan's banks have concealed the true extent of their problems. Each reporting season, increasingly tighter disclosure requirements have forced banks to disclose more and more problem loans.

But Nippon Credit's case and that ofLong-Term Credit Bank of Japan Ltd., which was also nationalized last year, are seen in the industry as extreme. Former executives at LTCB were arrested last month over similar allegations.

Regulators have said that because of irrecoverable loans to the property sector, Nippon Credit's liabilities currently exceed its assets by $790 million.

The arrests were prompted by a recent complaint filed by Nippon Credit's current state-appointed management, which alleges Kubota, 68, ordered that $830 million in unrecoverable loans be classified as recoverable in a March 1998 earnings statement to investors.