Yamaichi Securities Co. formally announced Monday that its liabilities exceeded its assets by 22.5 billion yen as of the end of March, contradicting earlier expectations by the collapsed brokerage and the Finance Ministry.

The capital deficit threw into doubt the possibility of Yamaichi repaying in full the 43 billion yen in subordinated loans it borrowed from 14 life and nonlife insurance firms.

Yamaichi President Shohei Nozawa told a news conference that he is deeply sorry for the disappointing results, but he stressed that all deposited securities and cash that need to be returned to clients is secured.

The firm will make every effort to gain approval of the necessary number of shareholders to pass a liquidation resolution at a shareholders' meeting later this month, he added.

Managing Director Masatoshi Watanabe explained that the total costs for keeping branches open up until March and returning assets to clients, as well as the outlays needed for closing offices, were greater than initially expected.

He added that Yamaichi had contacted the insurance firms to report the capital deficit, adding that repayment of the subordinated loans would be discussed in upcoming negotiations based on the contracts signed upon borrowing. "We have made no request (to the insurers) regarding how Yamaichi would like the matter to be settled, and I personally do not think we are in a position to do so," Watanabe said.

He stressed that the capital deficit would not affect repayment of the special loans extended to Yamaichi by the Bank of Japan, which were provided on precondition that the brokerage had sufficient capital to cover its liabilities.

As of the end of March, these BOJ loans amounted to 505 billion yen, down from the late-November peak of 1.2 trillion yen, according to Yamaichi.