Nippon Credit Bank was Japan's second nationalized bank in two months

Nippon Credit Bank, one of Japan's long-term credit banks, was among the most heavily burdened by bad loans from the bubble era. It had announced a restructuring package in April 1997 and enhanced its capital, but a recent inspection by the Financial Supervisory Agency — against the background of a continuing deterioration in the economy — found the bank would be insolvent as of the end of March 1998: $30 billion of problem loans and a capital shortage of $813.8 million.

On 13 December 1998 the Prime Minister notified the bank that it would be temporarily nationalized under the Law Concerning Emergency Measures for the Revitalization of the Functions of the Financial System — part of Tokyo's $155 billion plan to nationalize failing banks and revive the financial system.

The Deposit Insurance Corporation temporarily acquired all shares, with support including loans, asset purchases and grants to cover losses; all obligations of the bank, including deposits, debentures, interbank borrowings and derivative transactions, would be performed smoothly. President Shigeoki Togo and other top executives resigned. It was the second nationalization in two months, after the Long-Term Credit Bank in October.

The Bank of Japan subscribed to preferred shares using funds it had contributed to the New Financial Stabilization Fund, and said it hoped the restructuring would be executed promptly. The bank continued to operate under state ownership while the government sought a buyer — the same path the Long-Term Credit Bank took before being sold to a Ripplewood-led consortium the following September.