MOODY'S CONFIRMS RATINGS OF DAI-ICHI KANGYO BANK
Tokyo, 08-01-97 -- Moody's Investors Service confirmed the A1/Prime-1 deposit ratings and the C financial strength rating of Dai-Ichi Kangyo Bank ("DKB"), in response to July 30 announcement of regulatory sanctions against the bank. DKB has publicly acknowledged that it made loans to a sokaiya racketeer-related company. The outlook for the bank's ratings remains negative.
According to the MOF's recent announcement, DKB will be banned on August 6 through December 31 from (1) lending to corporate customers that have no previous banking transactions with the bank, and (2) underwriting national and local government bonds. During one year commencing on August 6, the bank will be prevented from (1) opening new offices, and (2) engaging in loan liquidation sales and securitization business, over-the-counter sales of securities investment trusts, and the formation of a financial holding company, all of which will likely be allowed to Japanese banks in 1997. The bank is also required by the authorities to strengthen its internal control system.
Moody's said that these regulatory sanctions should not materially affect DKB's financial fundamentals. Moody's said that DKB's current ratings incorporate the expectation that the bank remains well-positioned to ultimately benefit from a rapidly deregulating environment, given its strong franchise in both wholesale and retail banking markets in Japan. However, the negative rating outlook reflects that the bank is facing significant challenges of strengthening management control and restoring its reputation, while preparing for the "Big Bang" financial reform. In addition, Moody's added that the bank's loan portfolio, especially its exposure to distressed construction companies, continues to require scrutiny.
The Dai-Ichi Kangyo Bank, Ltd., headquartered in Tokyo, is one of the largest banks in Japan and the world with assets of Yen 56 trillion (U.S.$454 billion) as of March 31, 1997.
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