“Explain the role of Shinsei bank in the financial system. Access its exposures and performance during the financial crisis of 2007-2011. Did it do well or badly?”
Bank description
Shinsei bank has had a chequered history as its predecessor was called Long Term Credit Bank of Japan (LTCB), which declared bankruptcy during the financial crisis in Asia in 1998. Until 2000, New York-based Ripplewood’ Holdings made an acquisition, took over the bank and renamed it to ‘Shinsei’ which represented ‘renaissance’ .
Shinsei now is a leading commercial bank providing a large range of financial products and services to both institutional and individual customers. The bank is aimed to become the best ‘retail bank’ in Japan, thus it has divided its business into three components: retail banking (core competence), institutional banking and commercial finance (mainly through its subsidiaries) . It is noteworthy that the Japanese government as the second-largest shareholder has held a 23.9% stake in Shinsei bank.
Assets and funding
Shinsei bank’s total assets was $115bn in end-2007, and a large proportion, about 48.78%, was used for loans to customers because of retail banking, further 17.2% was attributed to securities purchasing and investment, and borrowing from other bank only accounted for 9.5%. After stripping a total $9.65bn equity, the total liabilities was $105.6bn. The largest proportion, about 55% was come from retail banking, the deposits and negotiable certificates of deposits; besides, further 6.27% was attributed to debentures after consolidated.
The retail bank, as the core business of the Shinsei bank Group, has developed a stable, liquid and low-cost funding base. In its non-core business, although there was a slower growth in...
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... overseas securities and written off an amortization of goodwill belong to its subsidiaries. In consequences of plunge in bank equity and rapid growth amount of risk weighted assets, the bank Tier 1 capital ratio fell from 8.11% in end-2006 to barely 6.02% in end-2008. With the new strategy ‘back to track on retail banking’ and the liquidation of bad assets, the bank has met its Tier 1 capital target of 7.76% in end-2010.
What do Shinsei bank corporate management learn from the substantial losses in financial crisis is the importance of risk management in corporate governance. The bank should focus on its core competence, the retail banking, and to patch up relations with customers by providing proactive assistance, so as to establishing a stabilized earning bases. Besides, the bank should divest its non-core business assets and make provision for potential risks.
The trustees have reduced the organization to the extent necessary for the settlement of the bankruptcy. The loan portfolio in the Netherlands is not sold and therefore, all services of the bank have continued since the bankruptcy, except that the bank does not advise, close new contracts or initiate new loans, nor offer pay services. Company A currently loans more than €5 billion, of which €2 billion is securitized, to over 100.000 customers. There are still approximately 100 employees active for the bank. The interest repayments which Company A receives on the loan portfolio are used to pay costs and remittances to organizations who manages the securitizations and pledgees. What remains is be paid to creditors. To date, the trustees have paid out 74% to creditors. No additional distributors are expected for the coming five years. Each quarter, the trustees report on their activities. The trustees also publish an annual financial report each subsequent
Investment banks, Rating agencies and Insurance companies are key components of the financial market. In this presentation, I’m going to explain how these three key roles worked together to create the 2008 financial crisis.
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...nt acknowledge the collapsed of bubble economy in 1993. Many problems were not solved. The wholesale price in Japan is falling 4.2 percent every years and the Gross National Product decrease 2 percent every years (Watkins). Japan’s economy is still in trouble after the end of bubble economy. One of the major problem is the government did not try to fix the cause of problem. The government tries to quick fix the economy turn down (Watkins). It orders the public sector financial institutions to buy stock from stock market to raises price. The bank industry suffer heavy lose because people were unable to pay their loans (Watkins). Some bank cannot pay their employees with money; they have to pay them with unsold company inventory (Watkins). The Japanese government does not encourage companies to reduce their labors, but this put companies to financial risk (Watkins).
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]: Brill. Santomero, A. M., 1997. Commercial bank risk management: an analysis of the process. Journal of Financial Services Research, 12 (2-3), pp.
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