Hokkaido Takushoku: Japan's 11th-largest bank dissolved in a day

Hokkaido Takushoku Bank, with $76 billion in assets, was Japan's 11th-largest bank when it announced on 17 November 1997 that it would dissolve. It carried about $7.5 billion of bubble-era bad loans. In April 1997 it agreed to merge with Hokkaido Bank; on 12 September it postponed that merger, which had been scheduled for April 1998. The Bank of Japan recorded that after the postponement the bank 'began to lose market confidence as was seen in the sharp decline in its stock price as well as in the drops in deposit levels.' By mid-November it had told the BOJ it could not continue.

The resolution split the estate. The Bank of Japan provided liquidity under Article 25 of the Bank of Japan Law so the bank could keep operating until the transfer of business was completed. Only the sound assets and liabilities were assumed — by North Pacific Bank (Hokuyo Bank), which took the main Hokkaido business — while the Deposit Insurance Corporation provided support including the purchase of the bank's non-performing assets. The sound assets and liabilities held on Honshu, the main island, were to be separated and transferred to other financial institutions.

The chairman, president Sadamasa Kawatani, and all other board members resigned, and the finance minister announced that the BOJ would make unsecured loans to help the transfer. The market treated the end as clarity: the Nikkei-225 ended the morning session up 944.85 points, or 6.3%, at 16,027.37. Takushoku was the second domino of the month that broke Japan's no-failure consensus — Sanyo Securities fell on 3 November, Yamaichi Securities announced closure on 24 November, and a year later the Long-Term Credit Bank of Japan was nationalized.