Resona Holdings Inc. has incurred a 549.4 billion yen latent loss on the preferred shares it issued through the previous round of public fund injections, a senior government official said Thursday.
Tatsuya Ito, senior vice minister of the Cabinet Office, told the House of Councilors Budget Committee that the market value of the preferred shares due to be converted shortly into common stock has plunged to 218.6 billion yen from 768 billion yen.
This calculation is based on the assumption that all the shares will be converted into common stock, Ito said.
The public funds thus far injected into Resona total 1.168 trillion yen. , including those used for the issuance of other preferred shares.
Financial Services Minister Heizo Takenaka defended the government's plan to inject more public funds into Resona Bank, despite this hefty appraisal loss.
"This time, the government will have a sizable amount of common shares," he said. "We will minimize the burden shouldered by the public by helping to make Resona a valuable business entity that can sell the shares on the market in the future."
The government will keep a close watch on Resona's credit stance to help prevent a credit crunch, he said.
"Ninety-nine percent of Resona's borrowers are small and midsize companies," Takenaka said. "The revival plan must paint a picture on contributions to the local communities and those companies, so we will conduct tight scrutiny."
He countered claims that Resona's capital should be curtailed to make its shareholders share responsibility for its near-demise, stating that removing the doubts of bank depositors and borrowers is more important: "At first, some people raised concern that panic might ensue, but I think our decision proved to be right."