Japenese Financial Crisis - SPJCM
-
Upload
apurva-chiranewala -
Category
Economy & Finance
-
view
1.940 -
download
1
description
Transcript of Japenese Financial Crisis - SPJCM
BY
ANURAG GUPTA
NITI SAINI
SUDHANSHU RAWAL
All logos are trademarks and copyrights , this presentation is made by students of SPJCM for educational purpose.
Early Stage - Before mid 1994
Beginning of Crisis – mid 1994 to 1996
Financial Crisis of 1997
Financial Crisis of 1998
Management
Causes
No Financial Crisis post war till 1994
Financial deregulation started in 1970
Deposit Insurance Law
- Payoff – Y10 million per depositor
- Financial Assistance
Larger banks were perceived to be protected
Credit cooperatives - Tokyo Kyowa and Anzen failed
Financial Assistance from DIC
- No financial institution for claim
- Legal limit to payoff
Tokyo Kyoudou Bank or TKB established
- Y20 billion – Bank of Japan
- Y20 billion – Private Financial Institutions
Collective Approach - Hougacho
July 95 – Cosmo Credit Failed
Aug 95 – Hyogo Bank & Kizu Credit Co-op
Hougacho again followed
- Cosmo transferred to TKB
- Hyogo - Midori Bank, Y80 bn share capital
- Kizu - losses exceeded Y100 billion
- transferred to RCB
- Deposit Insurance Law amended
1995 – 1996 Jusen became major issue
Aggregate losses of Y6,410 billion
Tax Payers money was used
Deposit Insurance Law amended
TKB reorganized to RCB
- RCB given wider role
Nippon Credit Bank(NCB) restructuring in April- Assets of Y15 trillion
- Heavily exposed to real estate and large NPL’s
- Bank of Japan inducted Y290 billion
- December 1998 NCB failed and nationalised
Hokkaido Takushoku Bank(HTB) failed in November- Loans soured after bubble burst
- Merger with regional bank
- Deposit withdrawals accelerated
Sanyo Securities filed with Tokyo district Court for reorganization
- defaulted on repayment of unsecured call money
- Bank of Japan two-way operation
Central Point – A default by one Financial Institution, whether a bank or a non-bank, could have developed into major disruption, especially when overall financial system was fragile
Yamaichi Securities collapsed
- MOF and BOJ understanding to use
Compensated Fund for Deposited Securities
- BOJ faced credit risk
- who would bear final cost still unresolved
Tokuyo City Bank failed
- Rumor banks were on brink of collapse
Legislation to use Public Funds – Y30 trillion
Financial Crisis Management Committee
- No supervisory Power
All major banks collectively applied for Capital Injection – Y1.8 trillion
Long Term Credit Bank failed
- Assets of Y26 trillion
- Sumitomo Trust bank – Size of NPL’s
- Derivatives Portfolio
Financial Reconstruction Law
- Failed bank under Financial Reorganization
Administration
- Temporarily Nationalized
- Bad Loans were removed
- Losses covered by shareholders and DIC
- Feb 2000 LTCB purchased by New LTCB
partners
Financial Reconstruction Law
Financial Function Early Strengthening Law
Financial Reconstruction Committee(FRC)
Financial Supervisory Agency
Available public funds doubled
FRC injected Y7.5 trillion in march 99
Tier 1 capital – preferred stock
Unrealized capital losses and potential losses
Required banks to submit plans for improving profitability
RCB reorganized to RCC for removing bad loans
Securitization of bad loans using SPC’s
As of July 2002 major banks consolidated to 5 large financial groups
Deposit Insurance Law amendment
- current deposits and ordinary deposits would be
fully protected until March 2003
Problem of non-performing Loans
Negative Impact on economy
- Corporate sector
- Economy in recession
- Securitisation became available in late 90’s
Insufficient Provisioning
- 97-reporting requirement to MOF abolished
- Self assessment of loan portfolio
- Further guidelines in 99 – Profitability reduced
Inadequate Market Discipline
- Public disclosure of NPL’S non existent
- Moral Hazard
- 1999 – Comprehensive disclosure requirement
Deterioration of Bank’s Capital Positions
- Low profitability
- New stock impossible
- Capital injection using public funds not easily
available
THANK YOU