Concerning Hanwa Bank

November 21, 1996
Bank of Japan

Today, we were informed by Hanwa Bank and the Ministry of Finance of the following:
1. (1) Hanwa Bank's asset quality has rapidly deteriorated since the bursting of the so- called "bubble economy" and subsequent fall in land prices. It has become apparent, through recognition of the bank's financial condition in a recent inspection by the Ministry of Finance, that the amount of assets which should be written off exceeds capital, and that it has become difficult for the bank to restructure by its own efforts.
2. (2) Thus, the Ministry of Finance has made a judgment that it is unlikely that Hanwa Bank can continue normal business operations, and, pursuant to Article 26 of the Banking Law, has today ordered it to suspend business operations except for the repayment of deposits (excluding time deposits equivalent to the amount of debt when a depositor has debts of 100 million yen or more with the bank and time deposits which have not reached maturity).
3. (3) In order to clarify managerial responsibility, the President of the bank, Mr. Shinkyo, will resign.
It is truly regrettable that we have seen the failure of several financial institutions since the year before last. Nevertheless, the Bank of Japan believes that prompt measures to deal with insolvent financial institutions without delay will lead to the early rejuvenation of the functions of the Japanese financial system. Therefore, with regard to the difficulties at Hanwa Bank, the Bank of Japan, with the fundamental objective of protecting depositors and maintaining the safety and soundness of the financial system, will promptly arrange, in consultation with the Ministry of Finance, a comprehensive resolution scheme. Concretely, we are considering establishing a new bank which will assume all business of Hanwa Bank, so that the latter can be dissolved and liquidated. In so doing, in order to ensure that the resolution and liquidation process is smooth, we will utilize the Deposit Insurance System to protect depositors.
If a shortage of funds for deposit repayments should arise before the business transfer, all necessary steps will be taken to secure sufficient funds, including the extension of loans under Article 25 of the Bank of Japan Law.
With respect to deposits, as in every past failure of financial institutions, all deposits will be protected. Thus, there is no need for depositors to be concerned and we strongly hope that they act sensibly.
We have been informed that, in order to prevent any prudent business partners of Hanwa Bank from experiencing serious difficulties, the Ministry of Finance will request both government financial institutions for small businesses and private financial institutions to provide appropriate support and cooperation. Moreover, during the period while the bank's business is suspended, bills and checks which should be honored by Hanwa Bank will not be treated as dishonored under clearing house rules, which would otherwise lead to the suspension of business with banks.

Hanwa Bank

History: 1925-1926
established as Kinan Mujin Co., Shingu Mujin Co. and Fukutoku Mujin Co.
-1941
through a series of mergers establishment of Kouki Mujin Co.
1951
transformed into a mutual bank; renamed Kouki Mutual Bank
1989
transformed into an ordinary bank; renamed Hanwa Bank
Head Office: Wakayama City, Wakayama Prefecture
President: Takeshi Shinkyo (July, 1995-)
Capital: 5.6 billion Yen
Deposits: 507.4 billion Yen
Loan assets: 438.4 billion Yen
Number of offices: 53 (including 21 offices outside of Wakayama Prefecture)
Number of employees: 802