Financial Stabilization Law

Financial Stabilization Law

Legislation in Japan authorizing the injection of 30 trillion yen into the banking sector to protect depositors and shore up banks themselves. The law was passed in 1998 due to the Asian financial crisis. It is considered to have been a failure.
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The two banks are also negotiating business integration, with the possibility of applying for a public fund injection under a new financial stabilization law in sight after realizing the merger, the sources said.
The ruling Liberal Democratic Party (LDP), saying that the issue needs quick action, suggested to carry out a public bailout for the ailing bank under the existing financial stabilization law, which makes public money available to financial institutions.
TOKYO - Shonai Bank and Hokuto Bank, regional banks based in the Tohoku area of northeastern Japan, said Thursday they have started considering applying for an injection of public funds under a new financial stabilization law.
The financial stabilization law empowers the government to funnel public funds into regional lenders' capital bases to facilitate the financing of small and midsize companies.
The framework for temporary government control is also part of the financial revitalization bills, which will replace the existing financial stabilization law aimed at strengthening banks' capital bases.
Under the plan, the government is to provide a bailout fund from the 13 trillion yen in public funds, to be made available under the financial stabilization law, and help the bank to merge with Sumitomo Trust and Banking Co.
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