Japan's third biggest credit union went under with huge bad loans Friday, adding to a run of failures involving financial institutions serving the ethnic Korean community.
Chogin Kinki Shinyo Kumiai, doing business with ethnic Koreans loyal to Pyongyang's Stalinist government, asked the Financial Reconstruction Commission (FRC) to replenish its depleted liquidity holdings.
FRC chairman Hakuo Yanagisawa told a news conference that his commission declared Chogin Kinki insolvent and would send in government-appointed administrators to the credit union.
Under the law for protecting the nation's financial system, the Kobe-based credit union is eligible for an injection of public funds to meet its obligations to refund depositors, FRC officials said.
Chogin Kinki has 640 billion yen (5.6 billion dollars) in deposits, the third biggest among credit unions in Japan.
The government agency also plans to send in administrators to six of 13 pro-Pyongyang credit unions which collapsed in May last year with huge bad loans, mostly dating to Japan's "bubble economy" investment boom of the late 1980's.
The other seven of the 13 have accepted administrators who will scrutinise their books and management records. Plans to transfer the seven credit unions to two other healthy credit unions have been stalled.
On Monday, a total of 19 credit unions serving the pro-Seoul ethnic Korean community in Japan agreed to merge following recent collapse of some of their number.
The merged unit will take over the operations of the collapsed credit unions, including Kansai Kogin and Tokyo Shogin which were declared insolvent by the FRC earlier this month.
The new bank, tentatively named Kanshin Bank, will seek public funds to strengthen its capital base, they said.
Chogin Kinki was created in 1997 through the merger of five North Korea-linked credit unions in the western city of Osaka and its vicinity. It was aimed at taking over the assets and liabilities of the failed Chogin Osaka Shinyo Kumiai, another credit union with North Korean ties.
The government injected 315.9 billion yen of public funds into Chogin Kinki in May 1998 to enable it to take over the assets and liabilities of Chogin Osaka and reimburse their depositors -- TOKYO (AFP)
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