The Financial Services Agency on Friday published an elaborate set of criteria outlining when and how the government can nationalize a bank, but some analysts called the guidelines useless, pointing out that banks will find legal ways to make ends meet and that the FSA is clearly reluctant to follow through.
According to the criteria, if a bank's net earnings or core earnings-to-assets ratio falls 30 percent or more in one year, and if the bank shows no improvement in its earnings outlook, then regulators can "begin considering" converting government-held preferred bank stocks into regular stocks, which carry voting rights.
The same holds true if a bank fails to make dividend payments on these preferred stocks for two years running, or if a bank, after forgoing dividends on preferred stocks for one year, either announces reduced or canceled dividend payments for the full year.