The Bank of Japan on Tuesday asked the finance minister's approval to place 24.9 billion yen in legal reserve for fiscal 2004, including 5.5 billion yen in connection with special loans to the now-defunct Yamaichi Securities Co., to maintain the central bank's financial soundness, the BOJ said.
Following the minister's approval, the BOJ will make a formal decision on the transfer of net profit, or surplus, into legal reserve in late May, putting an end to the liquidation of Yamaichi Securities, which went bankrupt in 1997.
The BOJ is required by law to retain 5 percent of its net profit in each fiscal year to prevent an impairment of its capital base.
For fiscal 2004 ended in March, however, the BOJ asked for the minister's approval to transfer 10 percent of its net profit into reserve.
Of the 24.9 billion yen is wants to retain this year, 19.4 billion yen is equivalent to 10 percent of the BOJ's net profit of 194 billion yen in fiscal 2004.
The remaining 5.5 billion yen equals 5 percent of 111.1 billion yen in uncollectible loans to Yamaichi, which the BOJ will write off in its financial statement for fiscal 2004.
The amount of uncollectible loans was fixed as the collapsed major brokerage's bankruptcy procedure was completed in January.
The proposed transfer of net profit is estimated to raise the BOJ's capital adequacy ratio to 7.35 percent as of the end of fiscal 2004 for the first increase in six years.