Monday, September 28, 1998 Published at 12:19 GMT 13:19 UK
Business: The Economy
Japan agrees bank reform deal
Wrangles over the future of LTCB have been ironed out
Japan's ruling and opposition parties have finally agreed on a deal to salvage the country's debt-laden financial system.
"We'd like to bring the process to a conclusion as soon as possible," said Yoshiro Mori, secretary-general of the governing Liberal Democratic Party.
Last week, the LDP and opposition reached a basic agreement on the bills, but the deal was vague and began to unravel almost as soon as it was announced.
The two sides have now reached a compromise over how much power to give a new independent body that will be charged with regulating the finance sector.
The opposition, led by the Democratic Party, had wanted the body be given full authority over the financial sector.
They have now agreed regulation will be shared by the ministry and the independent panel.
They have also agreed that any bank whose capital falls precariously while purchasing an ailing bank that has been nationalised will be eligible for an injection of public funds.
US Ambassador Thomas Foley welcomed the breakthrough as " very constructive".
The United States and other countries have been growing increasingly impatient with Japan's inability to agree on the way forward for financial reforms, which are seen as essential for getting the country out of recession.
On Saturday, the two sides reached a compromise on one of their main points of contention - the fate of the ailing Long-Term Credit Bank of Japan.
The ruling party agreed to opposition demands that the government should acquire all of LTCB's shares, effectively nationalising it.
The government would then sell the bank back to the private sector after disposing of its bad assets.
The government has been trying to broker a merger between LTCB and Sumitomo Trust and Banking Co.
Under the terms of the new agreement, Sumitomo would be able buy LTCB shares from the government and turn the bank into a subsidiary.
The key points of the deal include:
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