Insolvency at Ashikaga Bank and the move to special crisis management (2003)

The line drawn by public control

To file this temporary nationalization under the words “a regional bank failed” is to see only half of what happened. The moment the deferred tax assets were written off in full, net assets sank to minus ¥102.3bn and shareholder value was gone. Yet every deposit was protected and the branches opened again the next morning. What the framework rescued was depositors and the flow of settlements; what was lost was shareholder value, and the management that had been unable to halt the expansion. It can be read as a case in which the Deposit Insurance Act drew a clear line between what can be saved and what cannot.

Public control could not, however, take on the pain of the region itself. Among the businesses that had depended on Ashikaga Bank's lending, failures followed one after another, and that damage no framework could compensate. Nationalization is not a mechanism for preventing collapse; it is only a mechanism for putting the aftermath in order. After roughly four years and eight months of public control, Ashikaga Bank was returned to private hands and in time joined with Joyo Bank to form one of the largest regional banking groups in northern Kanto. What becomes of regional finance is revealed less by the crisis itself than by how the crisis is wound up, and through which framework it is passed to the next stage.