Long-Term Credit Bank of Japan
Encyclopedia
, abbreviated LTCB in English and in Japanese, was founded in 1952 under the direction of the Shigeru Yoshida
government to provide long-term financing to various industries in Japan
. Along with the Industrial Bank of Japan
and the Nippon Kangyo Bank
, it was one of the major financiers of the postwar economic development of Japan. After extensive problems with bad debt in the 1990s, the bank was nationalized in 1998 and finally sold in 2000 to a group led by US-based Ripplewood Holdings
. Ripplewood restructured LTCB as a commercial bank, Shinsei Bank
.
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The Diet of Japan
enacted a Long-Term Credit Bank Act in June 1952 which became effective that December. LTCB was incorporated as a stock company (kabushiki kaisha
) with headquarters in the Kudan district of north-central Tokyo. It opened branches in Osaka and Sapporo in 1953, and established agencies at various regional banks. LTCB was almost immediately profitable, owing to the rapid expansion of the Japanese economy at the time. It declared its first dividend
in 1954 and was listed on the Tokyo Stock Exchange
in 1970.
The company moved to the Tokyo Building in Marunouchi
in 1956 and established its first overseas office in New York City
in 1964, followed by offices in London, Sydney, Amsterdam, Los Angeles, and other major financial centers. From 1972 onward, LTCB was involved in a variety of syndicated loan
s, private offerings, and other financings for multinational businesses, in part owing to the "oil shock" which had slowed the domestic economy. In 1988, LTCB acquired Greenwich Capital Markets, a Connecticut
-based securities firm, thus giving LTCB a US-based securities business as well. By the early 1990s, it was the largest handler of yen
-denominated foreign debt (samurai bond
s).
As of 1989, LTCB was the ninth-largest company in the world in terms of assets. It moved to a new office building on the south side of Tokyo's Hibiya Park
in 1993.
Following the collapse of the Japanese asset price bubble
, LTCB was troubled by a great deal of bad debt
s, principally from investments in hard-hit industries such as real estate, construction, housing finance, transportation, and services. By December 1991, the company determined that its bad debts were in excess of ¥2.4 trillion (US$19.2 billion), and despite management changes in the mid-1990s, the situation did not improve.
The Asian financial crisis of 1997, which bankrupted several major Japanese financial services companies (most notably Hokkaido Takushoku Bank
), exacerbated the situation. The Diet injected an additional ¥176 billion into LTCB in March 1998, but a study commissioned later that year showed that at least ¥920 billion was needed to handle the bad debts. SBC
(now part of UBS AG
) began a joint venture
with LTCB during this period, which collapsed once the poor financial state of LTCB became apparent.
LTCB briefly sought to merge with Sumitomo Trust and Banking
, one of the few stable Japanese banks at the time, but the latter discarded these plans after its investors reacted strongly to the proposal. The Keizo Obuchi
government, which had helped to broker the talks between the banks, then investigated the nationalization
of LTCB, which became effective by an act of the Diet on October 23, 1998.
Prosecutors opened criminal investigations of several LTCB executives, owing to illegal payments of dividends in 1998 while the company was insolvent. Corporate planning head Takashi Uehara committed suicide
in May 1999 shortly after his indictment was leaked to the public; Osaka branch manager Kazunori Fukuda followed suit days later. The company president Katsunobu Onogi and two others were arrested in June 1999: on appeal, Onogi was sentenced to three years in prison and four years' probation
. The other two executives were sentenced to two years in prison and three years' probation. The executives were also sued for damages
, but an initial judgment in the creditors' favor was overturned on appeal.
LTCB was purchased for ¥1 billion (US$9.5 million) in March 2000 by an investment partnership, New LTCB Partners CV, consisting of a consortium
of foreign banks led by Ripplewood Holdings
, which had bid against The Chuo Mitsui Trust and Banking Co.
for the acquisition of LTCB. The company was renamed Shinsei Bank
in June 2000. Although LTCB was delisted from the TSE upon its purchase, Shinsei, which was relieved of the bad debts of its predecessor, had a successful initial public offering
at 2004 and remains in operation today as a commercial bank
.
Shigeru Yoshida
, KCVO was a Japanese diplomat and politician who served as Prime Minister of Japan from 1946 to 1947 and from 1948 to 1954.-Early life:...
government to provide long-term financing to various industries in Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
. Along with the Industrial Bank of Japan
Industrial Bank of Japan
The , based in Tokyo, Japan, was one of the largest banks in the world during the latter half of the 20th century.It combined with Dai-Ichi Kangyo Bank and Fuji Bank in 2002 to form Mizuho Financial Group.- History :...
and the Nippon Kangyo Bank
Dai-Ichi Kangyo Bank
The , abbreviated as , was one of the largest banks in the world during the latter half of the 20th century. It combined with Fuji Bank and the Industrial Bank of Japan in 2000 to form Mizuho Financial Group....
, it was one of the major financiers of the postwar economic development of Japan. After extensive problems with bad debt in the 1990s, the bank was nationalized in 1998 and finally sold in 2000 to a group led by US-based Ripplewood Holdings
Ripplewood Holdings
Ripplewood is an American private equity firm based in New York, New York that focuses on leveraged buyouts, late stage venture, growth capital, management buyouts, leveraged recapitalizations and other illiquid investments....
. Ripplewood restructured LTCB as a commercial bank, Shinsei Bank
Shinsei Bank
is a Japanese commercial bank headquartered in Chiyoda, Tokyo.-History:Shinsei Bank is the successor of a trust bank, the Long-Term Credit Bank of Japan, which had a government monopoly on the issuance of many long-term debt securities...
.
History
Diet of Japan
The is Japan's bicameral legislature. It is composed of a lower house, called the House of Representatives, and an upper house, called the House of Councillors. Both houses of the Diet are directly elected under a parallel voting system. In addition to passing laws, the Diet is formally...
enacted a Long-Term Credit Bank Act in June 1952 which became effective that December. LTCB was incorporated as a stock company (kabushiki kaisha
Kabushiki kaisha
is a type of business defined under Japanese law.-Usage in language:Both kabushiki kaisha and the rendaku form kabushiki gaisha are used. The "K" spelling is much more common in the names of companies and in English-language legal literature, whereas the "G" pronunciation is dominant in...
) with headquarters in the Kudan district of north-central Tokyo. It opened branches in Osaka and Sapporo in 1953, and established agencies at various regional banks. LTCB was almost immediately profitable, owing to the rapid expansion of the Japanese economy at the time. It declared its first dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
in 1954 and was listed on the Tokyo Stock Exchange
Tokyo Stock Exchange
The , called or TSE for short, is located in Tokyo, Japan and is the third largest stock exchange in the world by aggregate market capitalization of its listed companies...
in 1970.
The company moved to the Tokyo Building in Marunouchi
Marunouchi
Marunouchi is a commercial district of Tokyo located in Chiyoda between Tokyo Station and the Imperial Palace. The name, meaning "inside the circle", derives from its location within the palace's outer moat...
in 1956 and established its first overseas office in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
in 1964, followed by offices in London, Sydney, Amsterdam, Los Angeles, and other major financial centers. From 1972 onward, LTCB was involved in a variety of syndicated loan
Syndicated loan
A syndicated loan is one that is provided by a group of lenders and is structured, arranged, and administered by one or several commercial banks or investment banks known as arrangers....
s, private offerings, and other financings for multinational businesses, in part owing to the "oil shock" which had slowed the domestic economy. In 1988, LTCB acquired Greenwich Capital Markets, a Connecticut
Connecticut
Connecticut is a state in the New England region of the northeastern United States. It is bordered by Rhode Island to the east, Massachusetts to the north, and the state of New York to the west and the south .Connecticut is named for the Connecticut River, the major U.S. river that approximately...
-based securities firm, thus giving LTCB a US-based securities business as well. By the early 1990s, it was the largest handler of yen
Japanese yen
The is the official currency of Japan. It is the third most traded currency in the foreign exchange market after the United States dollar and the euro. It is also widely used as a reserve currency after the U.S. dollar, the euro and the pound sterling...
-denominated foreign debt (samurai bond
Samurai bond
A samurai bond is “a yen-dominated bond issued in Tokyo by non- Japanese companies and subject to Japanese regulations”. These bonds provide the issuer with an access to Japanese capital, which can be used for local investments or for financing operations outside Japan. Foreign borrowers may want...
s).
As of 1989, LTCB was the ninth-largest company in the world in terms of assets. It moved to a new office building on the south side of Tokyo's Hibiya Park
Hibiya Park
is a park in Chiyoda City, Tokyo, Japan. It covers an area of 161,636.66m2 between the east gardens of the Imperial Palace to the north, the Shinbashi district to the southeast and the Kasumigaseki government district to the west....
in 1993.
Following the collapse of the Japanese asset price bubble
Japanese asset price bubble
The was an economic bubble in Japan from 1986 to 1991, in which real estate and stock prices were greatly inflated. The bubble's collapse lasted for more than a decade with stock prices initially bottoming in 2003, although they would descend even further amidst the global crisis in 2008. The...
, LTCB was troubled by a great deal of bad debt
Bad debt
A bad debt is an amount that is written off by the business as a loss to the business and classified as an expense because the debt owed to the business is unable to be collected, and all reasonable efforts have been exhausted to collect the amount owed...
s, principally from investments in hard-hit industries such as real estate, construction, housing finance, transportation, and services. By December 1991, the company determined that its bad debts were in excess of ¥2.4 trillion (US$19.2 billion), and despite management changes in the mid-1990s, the situation did not improve.
The Asian financial crisis of 1997, which bankrupted several major Japanese financial services companies (most notably Hokkaido Takushoku Bank
Hokkaido Takushoku Bank
, literally Hokkaidō Exploitation Bank, was one of major commercial banks in Japan, founded in 1899 as a "Special Bank" to promote capitalization on the island of Hokkaidō. Its nickname was ; it was also known in the media and business world as...
), exacerbated the situation. The Diet injected an additional ¥176 billion into LTCB in March 1998, but a study commissioned later that year showed that at least ¥920 billion was needed to handle the bad debts. SBC
Swiss Bank Corporation
Swiss Bank Corporation was a large integrated financial services company located in Switzerland...
(now part of UBS AG
UBS AG
UBS AG is a Swiss global financial services company headquartered in Basel and Zürich, Switzerland, which provides investment banking, asset management, and wealth management services for private, corporate, and institutional clients worldwide, as well as retail clients in Switzerland...
) began a joint venture
Joint venture
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets...
with LTCB during this period, which collapsed once the poor financial state of LTCB became apparent.
LTCB briefly sought to merge with Sumitomo Trust and Banking
Sumitomo Trust and Banking
is a trust bank in Osaka, Japan. It is one of the Sumitomo Group core companies, and is closely tied to Sumitomo Mitsui Financial Group.- External links :*...
, one of the few stable Japanese banks at the time, but the latter discarded these plans after its investors reacted strongly to the proposal. The Keizo Obuchi
Keizo Obuchi
was a Japanese politician who served in the House of Representatives for twelve terms, and ultimately as the 84th Prime Minister of Japan from July 30, 1998 to April 5, 2000. His political career ended when he suffered a serious and ultimately fatal stroke....
government, which had helped to broker the talks between the banks, then investigated the nationalization
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
of LTCB, which became effective by an act of the Diet on October 23, 1998.
Prosecutors opened criminal investigations of several LTCB executives, owing to illegal payments of dividends in 1998 while the company was insolvent. Corporate planning head Takashi Uehara committed suicide
Suicide
Suicide is the act of intentionally causing one's own death. Suicide is often committed out of despair or attributed to some underlying mental disorder, such as depression, bipolar disorder, schizophrenia, alcoholism, or drug abuse...
in May 1999 shortly after his indictment was leaked to the public; Osaka branch manager Kazunori Fukuda followed suit days later. The company president Katsunobu Onogi and two others were arrested in June 1999: on appeal, Onogi was sentenced to three years in prison and four years' probation
Probation
Probation literally means testing of behaviour or abilities. In a legal sense, an offender on probation is ordered to follow certain conditions set forth by the court, often under the supervision of a probation officer...
. The other two executives were sentenced to two years in prison and three years' probation. The executives were also sued for damages
Damages
In law, damages is an award, typically of money, to be paid to a person as compensation for loss or injury; grammatically, it is a singular noun, not plural.- Compensatory damages :...
, but an initial judgment in the creditors' favor was overturned on appeal.
LTCB was purchased for ¥1 billion (US$9.5 million) in March 2000 by an investment partnership, New LTCB Partners CV, consisting of a consortium
Consortium
A consortium is an association of two or more individuals, companies, organizations or governments with the objective of participating in a common activity or pooling their resources for achieving a common goal....
of foreign banks led by Ripplewood Holdings
Ripplewood Holdings
Ripplewood is an American private equity firm based in New York, New York that focuses on leveraged buyouts, late stage venture, growth capital, management buyouts, leveraged recapitalizations and other illiquid investments....
, which had bid against The Chuo Mitsui Trust and Banking Co.
The Chuo Mitsui Trust and Banking Co.
is a Japanese bank. It is a subsidiary of Mitsui Trust Financial Group.-External links:*...
for the acquisition of LTCB. The company was renamed Shinsei Bank
Shinsei Bank
is a Japanese commercial bank headquartered in Chiyoda, Tokyo.-History:Shinsei Bank is the successor of a trust bank, the Long-Term Credit Bank of Japan, which had a government monopoly on the issuance of many long-term debt securities...
in June 2000. Although LTCB was delisted from the TSE upon its purchase, Shinsei, which was relieved of the bad debts of its predecessor, had a successful initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
at 2004 and remains in operation today as a commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
.