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▼ Panel Urges ‘Fresh Start’ For Reeling Shoko Chukin Bank
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TOKYO (Jiji Press) — An industry ministry panel on Thursday recommended that the government decide whether to fully privatize scandal-hit Shoko Chukin Bank after a four-year reform period.
In its recommendations, the panel said the existing business model of the government-linked lender, whose main role is to help small companies cope with business crises, has reached its “limitations.”
The bank was urged to establish a new business model focusing on lending not reliant on collateral, business management support and turnaround assistance for small companies with relatively weak credit records.
Shoko Chukin Bank should earn fair interest and commission revenues from such services, the panel also said.
It added that whether to fully privatize the bank should be decided after progress on its reform is thoroughly examined four years later.
At the panel’s meeting, its chair, Yusuke Kawamura, called for a “completely fresh start” of the embattled bank. “We hope Shoko Chukin Bank will become a useful financial institution for small businesses,” Kawamura, deputy chairman of the Daiwa Institute of Research, stressed.
The panel also demanded stronger corporate governance and internal controls. A majority of the bank’s board members should be appointed from outside and a third-party committee should be set up to oversee its management reform, the panel proposed.
The panel said the successor to the bank’s president, Kenyu Adachi, a former vice industry minister, should be someone who has “strong leadership to carry out reform” and is familiar with field-level operations.
Also demanded were drastic cutbacks in Shoko Chukin Bank’s operations under the country’s emergency lending system at the center of the bank’s scandal.
The system allows companies facing difficulties due to financial crises, natural disasters or other reasons to take out low-interest loans from gov- ernment-affiliated financial institutions.
Shoko Chukin Bank dressed up its lending performance under the system through document falsification and other misconduct. Over the irregularities, the government issued a business improvement order to the bank twice.
In its recommendations, the panel said the existing business model of the government-linked lender, whose main role is to help small companies cope with business crises, has reached its “limitations.”
The bank was urged to establish a new business model focusing on lending not reliant on collateral, business management support and turnaround assistance for small companies with relatively weak credit records.
Shoko Chukin Bank should earn fair interest and commission revenues from such services, the panel also said.
It added that whether to fully privatize the bank should be decided after progress on its reform is thoroughly examined four years later.
At the panel’s meeting, its chair, Yusuke Kawamura, called for a “completely fresh start” of the embattled bank. “We hope Shoko Chukin Bank will become a useful financial institution for small businesses,” Kawamura, deputy chairman of the Daiwa Institute of Research, stressed.
The panel also demanded stronger corporate governance and internal controls. A majority of the bank’s board members should be appointed from outside and a third-party committee should be set up to oversee its management reform, the panel proposed.
The panel said the successor to the bank’s president, Kenyu Adachi, a former vice industry minister, should be someone who has “strong leadership to carry out reform” and is familiar with field-level operations.
Also demanded were drastic cutbacks in Shoko Chukin Bank’s operations under the country’s emergency lending system at the center of the bank’s scandal.
The system allows companies facing difficulties due to financial crises, natural disasters or other reasons to take out low-interest loans from gov- ernment-affiliated financial institutions.
Shoko Chukin Bank dressed up its lending performance under the system through document falsification and other misconduct. Over the irregularities, the government issued a business improvement order to the bank twice.
- January 15, 2018
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