Vice Finance Minister Nobuaki Usui on Monday admitted the ministry was less than thorough in inspecting the failed, Osaka-based Namihaya Bank's predecessors and added that the state's inability to help the bank rebuild is "regrettable."

In a regular news conference, Usui also stressed the ministry did all it could under the circumstances. But he did not admit the ministry was responsible for what turned out to be an inadequate handling of a bank merger.

The ministry inspected two financially troubled banks, Fukutoku Bank and Naniwa Bank, in April 1998 on the assumption that they would be merged into one bank with the help of public funds. But the ministry did not inspect the adequacy of the banks' efforts to write off their bad loans.

"It was impossible to check (the bad loan writeoff) at that point, when the banks had not compiled their annual earnings reports yet," Usui said.

Based on the ministry's plan, the two banks were merged in October into Namihaya. On Saturday, Namihaya was was declared insolvent by the Financial Reconstruction Commission with an estimated capital deficit of 116.1 billion yen as of the end of March.

Usui said he is not in a position to explain details of past inspections because the bank inspection authority has been taken over by the Financial Supervisory Agency, which was set up in June 1998.