Long-Term Credit Bank of Japan
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|Fate||Bankruptcy; acquired by Ripplewood|
|Predecessor(s)||long-term financial divisions of Nippon Kangyo Bank and Hokkaido Takushoku Bank|
|Key people||Binsuke Sugiura, President|
The Long-Term Credit Bank of Japan, Ltd. (株式会社日本長期信用銀行 Kabushiki-kaisha Nippon Chōki Shin'yō Ginkō ), abbreviated LTCB in English and Chōgin (長銀) 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.
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 loans, 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 bonds).
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 debts, 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.
- Gillian Tett, Saving The Sun (Harper Business, 2003)