The Bubble and Its Collapse
From about 1985, like many other banks, Takugin opened branches in Tokyo and Osaka, and became concerned with real estate. In ordinary banking activity, finance is not provided above the 70% of real estate value, but at the time of the bubble it was foreseen that land values would rise steeply, so real estate financing was offered at 120-130% of value. Many credit facilities at this time were taking a similar form of finance, but Takugin had been somewhat slow off the mark. It therefore had to set collateral at a lower precedence than the collateral which had been already given to other credit providers. This meant that the part of the loan repayable to Takugin would be less if the borrowing real estate company were to go bankrupt. Ultimately, this is exactly what was to happen.
As bubble economics collapsed in the 1990s, Takugin's level of bad debts began to soar. Bad debts exceeded ¥1 trillion, and the means of collecting them were lost. For example they had financed the Sapporo real-estate company Kabuto Decom to more than ¥120 billion, helping it to grow rapidly, and when the bubble collapsed and the debt became bad, from 1993 onwards they changed their attitude to coercively recovering the money. The result of the dispute with Kabuto Decom's leadership was to get Kabuto Decom's president indicted and arrested by the public prosecutor's office. Meanwhile, in a September 1994 Ministry of Finance study, the conclusions reached with regard to financing of resort companies were that ¥10 billion in loans continued without regard to the disposal of bad debts.
Read more about this topic: Hokkaido Takushoku Bank
Famous quotes containing the words bubble and/or collapse:
“Each swung in danger on its slender twig,
A bubble on a pipestem, growing big.”
—Robert Frost (18741963)
“The world was a huge ball then, the universe a might harmony of ellipses, everything moved mysteriously, incalculable distances through the ether.
We used to feel the awe of the distant stars upon us. All that led to was the eighty-eight naval guns, ersatz, and the night air-raids over cities. A magnificent spectacle.
After the collapse of the socialist dream, I came to America.”
—John Dos Passos (18961970)