(February 12 – 15:50 ET) – According to Japanese daily Yomiuri Shimbun, bankers in that country could be going to jail for their actions that led to the bankruptcy of several of the country’s financial institutions.

Four former Niigata Chuo Bank executives were arrested and charged with aggravated breach of trust last week. Officers of all seven banks that have been declared bankrupt since the Financial Reconstruction Law was enacted in 1998 are being held accountable for their actions.

The Financial Reconstruction Law requires that efforts be made to prosecute for criminal negligence the officers held responsible for bank failures. Eighteen former bank executives, including seven former presidents, have been indicted so far.

Large loans to affiliated companies have been blamed for the series of bankruptcies of second-tier regional banks in 1999. In the case of the Long-Term Credit Bank of Japan and Nippon Credit Bank, police were not able to hold the former presidents of the two banks liable due to the expiry of the statute of limitations, but they are being held responsible for instructing employees to window-dress bad loans.

The newspaper says the prosecution of the former bankers for criminal negligence has been hampered by the Japanese Finance Ministry which allowed window-dressing under the pretext of protecting the financial system. As well, auditing firms approved the banks’ accounts.

It has been estimated that more than 9.9 trillion yen of public funds will be required to write off the bad loans of the seven failed banks.

Current bank executives have filed compensation lawsuits against former executives of five failed banks, including the LTCB. Others are looking into the possibility of filing civil complaints against former executives of the Nippon Credit Bank and Niigata Chuo Bank.
-IE Staff