The Supreme Court on Dec. 7 scrapped an earlier ruling that had found three former executives of the now-defunct Nippon Credit Bank guilty of window-dressing and ordered the Tokyo High Court to retry the case. The three had been convicted of submitting false financial statements for the business year ended March 31, 1998, by undervaluing bad loans and concealing an unabsorbed loss of ¥159.2 billion.
The top court's decision highlights the confusion caused by a sudden change in the government's policy toward banks.
Although the Finance Ministry had been tolerant of banks' practice of postponing the disposal of bad loans, it issued new guidelines in 1997, calling on them to strictly assess their assets. The main point of the trial was whether the three executives' decision to use the ministry's old guidelines, instead of the new guidelines, in making the financial statements was proper.