The Tokyo Metropolitan Assembly on Friday decided to inject an additional ¥40 billion of taxpayer money into the money-losing Shinginko Tokyo. The Liberal Democratic Party and Komeito supported the capital bailout while three groups, including the Democratic Party of Japan and the Japan Communist Party, opposed it.
The first bank to be set up by a local government, Shinginko Tokyo started operation in April 2005 with the metro government investing about ¥100 billion. It embodied Gov. Shintaro Ishihara's pet idea of assisting small and medium-size companies suffering from the credit crunch resulting from the financial crisis of the late 1990s. The special feature of the bank's operation was that it would lend up to ¥50 million over a maximum five years without collateral or guarantors.
But it apparently failed to strictly examine the performance and creditworthiness of borrowers. Defaults on loans amounted to ¥28.5 billion as of Jan. 31, while loans and guarantees totaled only ¥242.2 billion over the first two years. The bank's cumulative losses will reach ¥101.6 billion as of March 31.