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Statement by the Governor concerning the Merger of the Sumitomo Trust and Banking Company and the Long-Term Credit Bank of Japan

(tentative translation)

August 21,1998
Bank of Japan

1. On June 26, the Sumitomo Trust and Banking Company and the Long-Term Credit Bank of Japan announced a plan to merge. Following negotiations by the two banks, we have today been informed by the Long-Term Credit Bank of Japan that: (i) based on the merger plan, it will implement a comprehensive disposal of its non-performing loans and a thorough restructuring including the closing of all overseas establishments, (ii) these measures are expected to push forward the merger plan with the Sumitomo Trust and Banking Company, and (iii) it will apply for a capital injection pursuant to the Law regarding Emergency Measures for Financial System Stability in order to restore market confidence, as it will temporarily become undercapitalized as a result of the comprehensive disposal of its non-performing loans. We have also been informed by the Sumitomo Trust and Banking Company that it will make every effort in positively continuing its negotiations towards the merger with the Long-Term Credit Bank of Japan.

2. The Bank of Japan appreciates the two banks' positive intentions to continue negotiations toward the successful completion of the merger plan, as it will contribute to financial system stability and consolidation in the Japanese banking industry. In addition, the restructuring plan of the Long-Term Credit Bank of Japan will also promote progress of the merger plan. Since the Long-Term Credit Bank of Japan has a large number of customers in the global markets and is engaged in a wide range of business activities, it is all the more important for the Long-Term Credit Bank of Japan to carry out its business smoothly while enhancing market confidence until the completion of the merger, in order to avoid confusion in the domestic and overseas markets. Thus, we will respond appropriately when the bank files its application for capital injection pursuant to the Law regarding Emergency Measures for Financial System Stability.

3. The Bank of Japan, as the central bank, will provide necessary support, including liquidity support to the Long-Term Credit Bank of Japan, to ensure the smooth implementation of the merger, in cooperation with the Financial Supervisory Agency and the Ministry of Finance and make maximum effort to ensure stability in the Japanese financial system.