ABSTRACT
It was a spectacle unlike anything seen before, an event the like of which no one could remember. In March 1999, fifteen of the largest private commercial banking institutions in the world, banks with names like Industrial Bank of Japan (IBJ), Dai-Ichi Kangyo Bank (DKB), Sumitomo, and Fuji—virtually the entire banking sector in the world's second largest economy—humbly and ashamedly approached their government for capital funds. This being Japan, the funds—$60.5 billion (¥7,259 billion)—were duly provided. (A year earlier, most of the same banks—and others—had received government aid amounting to some $17 billion.) There was hardly any choice, either for the banks or for the government. Japan's banking system was essentially insolvent and on the verge of collapse. Two of the three specialized long-term lending banks, Long Term Credit Bank (LTCB) and Nippon Credit Bank (NCB), had already collapsed and been nationalized in October and November of 1998.
