SBI Shinsei Bank: Completion of Repayment Leaves Lessons for the Public Fund System

Editorial

14:56 JST, August 7, 2025

SBI Shinsei Bank completed the repayment of public funds it received during the era of its predecessor — the Long-Term Credit Bank of Japan — at the end of last month.

This means that all public funds injected by the government in response to the financial crisis of the late 1990s have now been repaid. However, the fact that it took a quarter of a century for the repayment to be completed can be said to have left behind a sobering lesson about the public fund system.

In the early 1990s, the bubble economy collapsed, and financial institutions burdened with massive nonperforming loans were forced to deal with losses, leading to a sharp deterioration in performance. The Long-Term Credit Bank of Japan, which had supported Japan’s postwar reconstruction, fell into decline after enjoying the bubble economy and became a symbol of the financial crisis.

In 1997, Yamaichi Securities Co. decided to voluntarily close down its business and Hokkaido Takushoku Bank went bankrupt, spreading anxiety throughout the financial system. In 1998, the government established a public fund system and began injecting funds into financial institutions, investing a total of over ¥12 trillion by 2003.

Financial institutions are social infrastructure that are vital in terms of the public interest. Looking back now, the injection of public funds can be evaluated as having been an essential response. However, it must be said that the repayment of public funds by SBI Shinsei Bank was completed too late.

This was due to the fact that the government, in exchange for injecting public funds, held common shares in the bank, creating a system in which sufficient funds could not be recovered unless the share price rose. This was further compounded by the bank’s deteriorating performance and the Financial Services Agency’s inadequate guidance on operational improvements.

In 2021, SBI Holdings, Inc., a major internet securities firm, made the then Shinsei Bank — which was established in the renaming of the Long-Term Credit Bank of Japan — a subsidiary, finally paving the way for the completion of the repayment of public funds.

As long as taxpayers’ money is being injected, financial institutions need to once again recognize their heavy responsibility toward society. It is hoped that SBI Shinsei Bank will use the completion of the repayment of public funds as an opportunity to pursue customer-oriented management.

The current situation is that public funds have been injected to support regional economies in response to economic crises that were caused by such events as the 2011 Great East Japan Earthquake and the COVID-19 pandemic. They are also being used to promote restructuring in the financial industry. About ¥400 billion in public funds remain unrepaid.

It is undesirable for public funds to be injected and then for businesses receiving them to be content with the situation and there being no prospect of repayment.

The Bank of Japan ended its large-scale monetary easing policy, and a world with interest rates has arrived. It is now an era when financial institutions are being further tested on their management capabilities. It is hoped that they will continue to map out their strategies for management improvement.

It is also vital for the FSA to supervise financial institutions, while carefully examining the outlook for the Japanese economy, the future of regional economies and the prospects for the earnings environment of financial institutions, among other factors.

(From The Yomiuri Shimbun, Aug. 7, 2025)