Japan's Resona bank seeks government bailout

Reviewed by Hitoshi URABE

Article:
"Japan's Resona bank seeks government bailout"
(By Michiyo Nakamoto) Financial Times
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Resona Group, fifth largest banking group in Japan, filed for public money infusion after it realized that regulatory capital ratio had fallen below 4%, which is considered a minimum for banks operating domestically.

Resona Group is a result of one of recent mergers among large Japanese banks. They were used to be Daiwa Bank and Asahi Bank, where Asahi itself was a result of a merger several years back between Kyowa Bank and Saitama Bank. Resona, a strange sounding word in Japanese, is said to be derived from the Latin word "resonus" meaning "resonate" or "resound." The Bank explains that the word was chosen also because the sound of the word is similar to the Japanese word "risou" which means "ideal" in English.

Regrettably, it was the gloomy tone of depressed economy the bank resonated with.

Perhaps one fortunate aspect of it was that the announcement came amidst the G-8 finance ministers' meeting held in Deauville, France. Japan's Finance Minister Shiokawa was there to explain the incident to his colleagues in other major countries in person. His assurance that Japan's financial system will not be affected by the Resona's affairs was reported to be received favorably by other attendees.

In addition, there was a whole weekend to prepare for the opening of the market, and bank counters, on Monday.

The government was very quick in responding, too. By midday Sunday, all the immediate plans were laid out, and, perhaps more important, thorough explanations by relative parties were released for the public to know, with a stress on the fact that all deposits will be secure.

Monday started with an extraordinary but pre-announced move by the central bank to provide liquidity in the system to avoid any cash shortage. The effect of it is hard to measure, however, as the whole market was calm, at least significantly quieter than most of the people had anticipated. Interest rate in the money market stayed at 0 to 0.001% levels, and although the stock market began with heavy selling, bringing the Nikkei average at one time to 7,974.17, the lowest intraday level since May 2, it did stabilize in the afternoon to close at 8,039.13, down just 0.96% from the previous day.

The market fared well under the circumstances, and so did the people. There was no confusion, rioting, or shouting reported at hundreds of Risona outlets. In fact, it was reported that the number of customers showed up at their counters were no different from an ordinary business day.

Through experiencing several mishaps at financial institutions during these ten years, perhaps the whole society, from lawmakers to ordinary people, learned to cope with these incidents, that panicking is the worst antidote in such situations, and has acquired resiliency. Which is good, and lessens the fear for the future. It is probably not that people expect more would come, but it is always good to Be Prepared!