The Tokyo Metropolitan Government and 15 major banks said Wednesday they have settled their dispute over Tokyo's bank tax.

The agreement comes a day after the metro government refunded a total 234.4 billion yen to the 15 banks and other banks that had shied away from joining the plaintiffs.

The out-of-court settlement came after a lawsuit filed by the banks had been appealed to the Supreme Court. The suit called on the court to declare the tax legislation illegal and invalid.

On Monday, the metropolitan assembly passed legislation to cut the tax rate to 0.9 percent of a bank's annual gross operating profit -- a bank's profit before loan-loss charges can be subtracted from gross earnings. These charges have been huge in recent years.

The tax rate had originally been set at 3 percent.

The metro government had agreed on Sept. 12 to cut the tax rate to 0.9 percent.

The tax legislation had cleared the metro government's assembly in March 2000 after being proposed by Tokyo Gov. Shintaro Ishihara earlier that year.

The metro government had collected a total of 280 billion yen in tax revenues between fiscal 2000 and fiscal 2002.

On March 26, 2002, Tokyo lost a court case over the legitimacy of the tax at the Tokyo District Court.

The district court ordered the metro government to refund the tax on the grounds that it was unfair to collect it from the banks, who were already under heavy financial pressure due to poor lending decisions.

The metro government appealed the ruling to the Tokyo High Court, which agreed with the district court and again denied the legitimacy of the tax in a Jan. 30 ruling.

Tokyo appealed to the Supreme Court in February.