The prefectural and municipal governments of Saitama are willing to use roughly 1 billion yen in local taxpayer funds to claim a stake in Saitama Resona Bank, the local arm of Resona Holdings Inc., Saitama Gov. Kiyoshi Ueda said Tuesday.
The move is indicative of local constituents' fears for their regional economy, should their main regional bank meet the same fate as the nationalized Ashikaga Bank in neighboring Tochigi Prefecture.
"If locals will invest money into the bank, we will gain a say in how Resona is run," Ueda was quoted as saying by Kyodo News.
Resona Holdings said it will consider the plan when it receives a formal offer from the localities in question.
The irony is that Tochigi Prefecture and the city of Utsunomiya had carried out precisely the same maneuver in respect of Ashikaga Bank, buying 400 million yen worth of shares in 1999 and 2000, when the bank sought a capital boost.
That money virtually evaporated when the government seized Ashikaga Bank shares on Dec. 1.
Unlike Ashikaga, however, Saitama Resona is in relatively good shape, according to bank analysts.
Resona Holdings received nearly 2 trillion yen from the national government six months ago, bringing the total of public funds in the country's fifth-largest lender to 3 trillion yen.
It is not uncommon for Japanese regional municipalities to prop up and even create local financial institutions.
Iwate Prefecture set up Tohoku Bank's predecessor in 1932, putting up nearly 1.5 million yen of the bank's starting capital of 2.1 million yen.
The Tokyo Metropolitan Government backed Tokyo Tomin Bank in 1951, calling on local companies to put up cash, and is now looking to set up another bank specializing in loans to small companies in 2005.