2003年01月21日 火曜日

Shinsei Bank - A Child of Evil

by Justin Hall

Business

Japan's banking crisis is a favorite subject in the West these days. Politicians, pundits and journalists fault banks in Japan for loaning money to crony companies with no mind for repayment. They believe these loans are dragging the Japanese economy into a contorted economic slowdown.

In a Chanpon business arrangement, in 1998 the Japanese government allowed some foreign investors to purchase the failed Long-Term Credit Bank of Japan. They renamed the bank Shinsei (rebirth). Shinsei was allowed to turn over loans that had lost much of their value back to the government.

Dealing with bad loans directly, not bearing the burden of other banks has earned them some bitter ire. The Wall Street Journal has been running articles examining this business/banking culture mixing. The most recent piece "U.S. Investors Rebuild A Failed Tokyo Bank" should require some paid user registration, but here may be a free version.

Some excerpts:

...listen to what the Japanese public thinks about Shinsei. "A child of evil," thunders Ryo Takasugi, who wrote a popular novel based on Shinsei, depicting greedy Wall Street bankers who milk Japan. "The nation must be outraged," barks an editorial in the Weekly Post. Shinsei's chief executive has twice been hauled before Parliament by lawmakers miffed at Shinsei's tactics.

Why the hostility? To succeed, Shinsei has used Wall Street techniques to restructure or cut off deadbeat Japanese borrowers. That approach is common in the U.S. and Europe. But it is making enemies in Japan, which for decades has viewed banks as charity hospitals for sick companies, despite a mounting financial crisis. So while Shinsei has emerged as a financial success, eliminating old bank traditions such as a quitting bell that rang every evening at 5:30, it has failed to achieve its loftier goals of catalyzing a Western-inspired revival in Japanese finance.

...

Several big borrowers had declined to restructure their businesses or repay their debt, and Shinsei was preparing to return the loans to the government, potentially creating other Sogo-like disasters.

Before Shinsei could act, the top regulator at the Financial Services Agency summoned Mr. Yashiro and one lieutenant on Aug. 10 to a meeting in Tokyo. Shoji Mori, a career bureaucrat fond of puffing cigarettes from a long FDR-style holder, laid down the law. Shinsei had rapidly cut its overall lending, and thus failed to uphold the "public nature" required of a bank, Mr. Mori said, according to an internal Shinsei document. Shinsei, he added, must keep extending credit to four other borrowers the bank was seeking repayment from, according to the document.

"Shinsei should be concerned about its reputation risk, as anything can happen down the road," Mr. Mori warned, according to the transcript.

But the company is showing a profit at least, in the banking sector that is riddled with problems. So perhaps their strategy of dealing directly with under-performing loans will yet yield some contagious honesty for Japan's ailing economy.

Posted by Justin Hall at 2003年01月21日 17:42

Comments

Justin- glad to see you covering the Japanese banking industry here at Chanpon :) Makes for interesting reading eh? Terrie Lloyd is writing about Masayoshi Son's attempts to sell off Softbanks holdings in Aozora bank. It'll be interesting to see who ends up owing those shares- whether it'll be Sumitomo Mitsui (who shouldn't be investing in bad banks in the first place) or a foreign company.
http://www.terrie.com (no permalink!)

2- troy

remenber japan is for the japanese, so what you say does not matter

3- Ordas

PLS: IT'S VERY IMPORTANT SEND THIS LETTER TO THE DIRECTORY OF SHINSEI BANK - URGENTLY

Buenos Aires, October 14th, 2003
At.: President of
SHINSEI BANK

It came to our attention through the media that you ar representative of creditors of the Argentine Republic.

We are internal creditors of the Argentine Republic and are well advanced in legal actions to protect and collect our credits.

Based upon the meetings held with the Argentinean authorities we are drafting a prospective agreement that would consist in the following:

1) Refinancing 100% of the debt with no deduction whatsoever, stipulating a 20-year payment term at an annual interest rate of 1.5%;

2) The refinancing would be guaranteed by US Federal Reserve guaranties;

3) A tax reform setting forth a TAX similar to that applicable in USA for ensuring funds reception;

4) Creation of a trust between the international banks and the Argentinean Government, for this entity to be in charge of collecting and distributing the funds received;

5) The trust shall distribute the collected amount in the following way: 50% for Argentina to maintain its operations and the remaining 50% to settle the outstanding liabilities with all the creditors;

They request that once this requirements are met, the creditors should bind themselves to invest 10-15% of the refinanced amount in the development of the country�s economy, amount which would also be guaranteed by whichever guaranties the creditors deem suitable.

Currently, we are analyzing these alternatives and, to our knowledge, your clients must have full understanding of the negotiations in order to reach an egalitarian settlement. Should you find this conditions of interest, we ask you to contact us via e-mail as soon as possible.

We are already in contact with the Club from Paris and the Club from Rome. Both parties took interest in reaching an agreement under this conditions and would join our claim, although they will first forward suggestions and/or clarifying notes for us to be able to move onwards with the negotiations.

We want to make it clear that you too can make suggestions for enhancing the proposed criteria, such suggestions shall be analyzed by all to reach a global agreement, that is why it is of vital importance that you send them as soon as possible.

Sincerely,


NOTE: Please feel free to ask for any detail and/or additional information that you deem necessary, we will be glad to forward it to you.


Buenos Aires, 14 de Octubre de 2003
A los Sres. Directores de
SHINSEI BANK
S. / D.
De mi consideraci�n:
Tenemos conocimiento que Ud. son representantes de acreedores de la Rep�blica Argentina.
Nosotros somos acreedores internos de Argentina y tenemos avanzadas causas judiciales para resguardar y poder cobrar nuestras acreencias.
De reuniones mantenidas con autoridades de la Argentina, estamos elaborando un posible acuerdo que consistir�a en lo siguiente:
1�) Refinanciaci�n del 100% de la deuda sin ninguna quita, otorgando un plazo de 20 a�os con una tasa de inter�s del 1,5% anual;
2�) La refinanciaci�n tendr�a un aval conformado por garant�as extendidas por la Reserva Federal de USA;
3�) Reforma impositiva estableciendo un TAX similar al de USA para asegurar el ingreso de fondos;
4�) Creaci�n de un fideicomiso entre los bancos internacionales y el estado argentino, para que este organismo se encargue de la cobranza y distribuci�n de los fondos que se recauden;
5�) El fideicomiso distribuir� la recaudaci�n que se obtenga de la siguiente forma: un 50% para que la Argentina mantenga su funcionamiento y el otro 50% para cancelar las obligaciones pendientes con todos los acreedores;
Solicita el gobierno argentino que cumplidas las condiciones, los acreedores se obliguen a efectuar inversiones para el desarrollo de la econom�a del pa�s del orden del 10/15% del importe que se refinancie, que tambi�n quedar�a garantizado con avales a satisfacci�n de los acreedores.
En estos momentos estamos estudiando estas alternativas y, entendiendo que sus clientes tambi�n deben estar interiorizados de todas las negociaciones para tratar de lograr un acuerdo igualitario, le solicitamos que si estas condiciones pueden resultarles de inter�s que nos contesten por email lo mas urgente posible.
Ya estamos en contacto con el Club de Par�s y con el Club de Roma quienes mostraron inter�s en un acuerdo dentro de estas condiciones y se unir�an a nuestros reclamos, aunque previamente nos van a remitir sugerencias y/o aclaraciones para poder avanzar en las negociaciones.
Tambi�n le aclaramos que Uds. pueden realizar propuestas para mejorar las bases descriptas, que ser�n estudiadas por todos para lograr un acuerdo global, hecho por el que esperamos vuestra respuesta con la mayor celeridad posible.
Le saludo muy atentamente.
NOTA: Desde ya cualquier detalle y/o ampliaci�n que entienda Ud. necesaria, quedamos a disposici�n para remitirsela.


Was just looking for a site like this, thanks



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水, 1 22, 2003, @ 3:33
Shinsei Bank, Japan
› from Gen Kanai weblog

Justin Hall found a great article in the WSJ on the recent history of Shinsei Bank. WSJ.com - U.S. Investors More »