The government placed the troubled Long-Term Credit Bank of Japan under state control Friday after the bank reported it may have to suspend repayments of deposits and other obligations.A report released by the Financial Supervisory Agency on the same day said the LTCB is insolvent, with liabilities exceeding assets by 340 billion yen if stockholdings and other assets are assessed at market value.The LTCB became the first firm to be nationalized under the newly enacted law concerning emergency measures to revitalize the financial system, a law that enables the government to put failed and failing banks under state control. It also is the first bank to be nationalized in Japan's postwar history.In the morning, the LTCB filed a report with the government that the bank is facing the risks of severing credit lines to its borrowers and defaulting on its obligations to creditors. Following the bank's report, Prime Minister Keizo Obuchi approved the acquisition of the LTCB in accordance with Article 36 of the new law.The article allows the government to nationalize a failed bank by purchasing all of its common shares -- regardless of potential shareholder protest -- at a low price to be determined by the government.The prime minister is also authorized to handle failed or failing banks until the establishment of the Financial Revitalization Commission, an independent five-member body aimed at resuscitating the nation's ailing financial system. The commission is scheduled to be launched in December.Following the government's decision to take over the bank's management, the Financial Supervisory Agency immediately issued a management improvement order based on the Banking Law. Obuchi said in a statement that all deposits taken, bank debentures issued and interbank and derivatives transactions conducted by the LTCB will be settled in an orderly manner, in accordance with their due dates.He also said that the LTCB's loans to sound borrowers will be maintained. "Therefore, depositors and market participants should be reassured and are strongly urged to remain calm," Obuchi said.Under the nationalization process, the LTCB's current management will be replaced by a government-appointed team, and the bank will be required to form a sound credit policy and restructuring plans. The Deposit Insurance Corp. will also provide the LTCB with funds necessary for its daily operations and with special financial assistance.The LTCB's irrecoverable bad loans will be purchased by a newly created resolution and collection bank for liquidating such loans. After solving the bad loan problems, the government will attempt to find another bank that is willing to acquire the nationalized LTCB. Meanwhile, the government formally appointed Hakuo Yanagisawa, director general of the National Land Agency, to a new Cabinet post in charge of financial system stabilization.