However, the experience of the NDIC in the management of the
Bridge Banks it previously established, have been highly successful.
Regulators are pushing for the authority to put up special purpose vehicles called
bridge banks, which will ensure that bank services to the public will not be disrupted even if an institution has been ordered closed.
The nationalised lenders will now be run by three
bridge banks. These are Keystone Bank, Mainstreet Bank and Enterprise Bank.
The compromise version calls for obliging failed banks to choose one of two options -- let the government make a forced purchase of all of its common shares or come under government administration by becoming
bridge banks.
Under the bills,
bridge banks would be government-controlled banks that would replace commercial banks facing imminent collapse.
Bridge banks would basically provide an acquiring bank with two years to assess the quality of the loan portfolio held by the
bridge bank.
The establishment of
bridge banks to take over failed financial institutions is the centerpiece of the government's plans for financial revitalization released July 2, which aims to salvage the financialsystem from the bad-loan mess.
Finance Minister Kiichi Miyazawa on Friday asked the opposition camp to revise a key part of its bank-resolution scheme calling for liquidating failing banks, rather than allow such banks to be permanently transformed into
bridge banks.
As part of the proposed system, the government will transform insolvent banks into state-controlled
bridge banks entrusted with continuing to lend, take and refund deposits until private banks make a purchase offer for the
bridge banks.
