TOKYO, FEBRUARY 21: Japan's Bank of Tokyo Mitsubishi (BTM) said on Monday it would become the first major bank to repay a hefty injection of public funds, a move analysts said showed its determination to be free of state interference. BTM, the nation's biggest bank, said that later this month, on February 28, it would repay the 100 billion yen ($904.5 million) it received from the government in March 1998 to bolster its capital base.Analysts say other banks are unlikely to follow suit at the moment because their financial conditions are still not as strong as BTM's.
In March 1998, the government injected a total of 1.8 trillion yen ($16.3 billion) in public funds into 21 major and regional banks, including BTM, to help boost their capital.
The banks' capital base had fallen to critical levels due to the write-off of trillions of yen in bad loans caused by the bursting of Japan's asset-price bubble of the early 1990s.
BTM made no secret of its reluctance to accept public money, arguing that its capital base was not that weak and could be brought back to normal levels without government support.
But the government worried that if BTM did not accept money it could have an adverse impact on other major banks because it might highlight the relative weakness of their capital base. So the government forced all major banks to accept 100 billion yen each.
But when the government injected a further 7.46 trillion yen in capital into 15 major banks in March 1999, BTM firmly declined. It was the only major bank that did not take public money.
"It's no surprise that Bank of Tokyo Mitsubishi is repaying public money, because it wants to be independent of any government interference. They can afford to do so, while others cannot," said Nozomu Kunishige, a senior Lehman Brothers analyst.
BTM's ability to repay public money stems from its large holdings of shares with unrealised profits, he said.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.