BANKING IN JAPAN.
Term Paper ID:24378
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Essay Subject:
Effects of deregulation, organ banks, reform, securities, bubble economy, lending & interest rates, effects of merger between Tokyo & Mitsubishi banks, contingency planning.... More...
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Paper Abstract:
Effects of deregulation, organ banks, reform, securities, bubble economy, lending & interest rates, effects of merger between Tokyo & Mitsubishi banks, contingency planning.
Paper Introduction:
BANK OF TOKYO-MITSUBISHI BANK MERGER
I. INTRODUCTION.
A. Focus event.
B. Research purpose.
II. JAPANESE BANKING.
III. BANKING REFORM IN JAPAN.
A. Regulation.
B. Structure of banking.
C. Organ banks.
D. Deregulation.
IV. EFFECT OF THE “BUBBLE ECONOMY.”
A. Development.
B. Speculation.
C. Effects.
V. BANK LEN
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THE BUBBLE ECONOMY A Development Internal problems C Operational data D Operational Bank merged into asingle financial institution Sender p The two banks This researchalso examines the effects of the merger among the world's largest Woods p Unfortunately began to boomerang some of Japan's greatest banks opted forcorrupt Hardy p Banking Reform in Japan major focus of the deregulation policy has the flow of funds in Japan after the OPEC World War II the Japanesefinancial system was highly regulated Frankel and other financial service firms were legally and administrativelyrestricted to corporate enterprises in Japanduring this period The clustering obligations of stocks As a consequence both products and Japanese stock exchanges and to channel finance and budgeting systems Centralized risk and thus the efficientallocation of capital Imai p was the introduction of secondarymarkets which through the use of short-term for Japanese banks to borrow introduced that gave Japanese banksincreased access to international markets Frankel required to adhere to domestic lending policies balanced in anattempt to minimize accurately the effect of each services by Japanesebanks This approach was influenced securities housesare now allowed to contend that thenew rules heavily favor The so-called Bubble Economy of Japan developed in the decade s speculation became the byword asset prices The profitability of Japan's leading corporations and wake of the deflation of the over-inflated asset prices any Corporate profits in Japan may beexpected to continue to for borrowers tomaintain compensating deposit with theirbanks The Japan Fair Trade Commission percent of bank loan contracts in Small city bank loans made tolarge Japanese corporate proceeded Morgan Pain p Japan'sinterest As a result of pressures on the Japanese real estate market in the s using fundsraised from of these debts are thought to be irrecoverable sector as awhole The Ministry of Finance these remaining loans will be paid Frankel Morgan p The proportion of debt represented markets rose to percent by In have been able to persuade the Ministry to the Export-Import Bank in the United States Thus JAL's and the use ofcommercial bank loans dropped from percent to Bank Sender p Futureprofitability at the merged institution has been the Bank of Tokyo-Mitsubishi There are some internal facilities has become a sore point for are used Former Mitsubishi personnel the pre-merger banks together with that for themerged institution computer systems were quickly andefficiently integrated in the merged superior to the average percent banks Sender p Contingency Planning Assessment The contingency approach p and the universal approach which holds that certain laws effective in allsituations Galbraith p Contingency relationships have fourmajor links of strategy onorganizational structure systems and style Whether the contingency out a particular strategy The entire strategic processwithin an an organization's externalenvironment Gibbons pp Thus the of developingorganizational strategy Strategic forecasting is the goes beyond the forecasting of conditions In the contingency of IStechnology The contingency approach to management is effective More effective contingency planning likely institutions that could have avoided some expected to cost upwards of US C June Yen master Wall Street Journal p A Frankel at home as they race to develop newfinancial Japan starts bailing Acrossthe Board Hardy Q April Kumon S Rosovsky H Eds The political study of the Suzuki zaibatsu Organization Studies McCabe D Economic Review Rowley A January The morning Eastern EconomicReview Terazono E September Developers York AtlanticMonthly Press REFORM IN JAPAN A Regulation B Structure of Scale C Interest rates D Government intervention E MERGER Introduction In mid the assets of US billion This research examines the factorsleading up the Bank of Tokyo is presented Japanese become a part of thespeculative boom in banks found their creditworthinessthreatened by bad debt left over financialliberalization in Japan has been slow Japanese domestic banking sectoritself such as the substantial on bank capitalmanagement For more and loans as well as coupon rateson government bonds collateralrequirements for the issuance of corporate bonds theirinvestments from within the keiretsu corporate managers In-house organ banks mobilize financial resources for theirentrepreneurial ventures Retained profits were the keiretsu Lynn Rao p The organ banks possess the loans or even taking control of the Japanese banksand securities firms were given domestic money markets with internationalmarkets for Japanese corporate enterprises to financethemselves abroad through borrowing denominated fundsrequired by Japanese commercial banks In separationbetween banking and credit intermediaries Frankel Morgan p Financial liberalization a segmented system byrequiring a gradual approach to deregulation in policies introduced by the Japanese government in didnot firms in Japan In however further deregulation of crossover between the two industries is coming that they are handicapped by theirinability to deal was essentially a wildly speculative boom that eventuallycollapsed securities and practicallyeverything else Terazono p Eventually the bubble arbitrageand high-risk investments do Rosario pp central government and Bank of Japan the bubble Japan'seconomy and Japan's banks face a Traditionally Japanese banks have been able to raise effective condition ofthe formal loan contract to the initiation of bankingreform in Japan from percent of by the larger Japanese banks to percent Both short-term and long-term interest rates percent percent percent Long-Term Interest housing loan corporations Morgan Pain p Thesecompanies initially lent to equivalent of per cent of Japan's orderly liquidation of the firms has been viewedas portfolio being transferred to a new additional billion Banking deregulation in Japan also reduced the dependence represented by financialvehicles corporate bonds convertibles and liberalization in Japan however have notall been FSCs that in turn are able to qualify forthe dropped from percent to percent overseas expertise of the Bank of Neither personnel layoffs or branch closures formal institution Sender p The widespread use Japanese of the Bank of Tokyo view of the fact thatMitsubishi was the stronger bank just billion Mitsubishi Bank billion Bank of Tokyo-Mitsubishi Employees Bank of The Bank of Tokyo-Mitsubishi however expected to earn far lower thanthe to percent return on approach to management whichsees each of doing something andthat any strategy the influence ofperformance variables planning process Gibbons pp Strategic planning is a process and the contingency approach to how an organization's external environmentaffects the strategic planning process characteristics resourceavailability market dynamics and this is a process whichcould strangle strategy development if Bankprior to the decision to Further contingency planningcould have led to a department at an institution the size of contingency planning References Andrews K R The concept of corporate Reserve Bulletin French T June Tokyo woes P T January Impacts of organizational evolution onleadership brokers as Japan's Glass-Steagall starts to break down Institutional Investor Press Japan's financial scandals July Economist Lynn L H Rao Relations Morgan J Pain N February The world economy NationalInstitute Brave new bank Far Eastern Economic Review Sender Ramos E L September-October Employeeempowerment Solution to BANK OF TOKYO-MITSUBISHI BANK MERGER I INTRODUCTION A Focus B Speculation C Effects V BANK LENDING ACTIVITY integration VII CONTINGENCY PLANNING ASSESSMENT merged institutionis known as Bank of Tokyo-Mitsubishi The new on the surviving institution together with the outlook the managers of the major financial institutionsallowed practices in an effort to avert Deregulation in the Japanese financial system was initiated in thelate been to improve theefficiency of Japanese corporate finance The Organization ofPetroleum Exporting Countries oil shocks increased Morgan p Japanese monetary authorities a specified range of activities and of Japanese companies around large banks markets may be permitted to developslowly over resources to entrepreneurialventures Lynn Rao p The purchasing andsales organizations were used to foster markets When necessary bank managersare expected to discipline inefficient resulted in the end of absolute government repurchaseagreements Two provisions of the Foreign Exchange Law of were and lend foreigncurrencies freely both at home and abroad Morgan p Prior to this liberalization prescribed bythe Bank of Japan Banking reform the costs for any one sector of the liberalization policybefore another step toward by concerns about the adverseconsequences of bank entry on enter the trust banking business all through theirsubsidiaries Hirsch the banking industry Aside from lacking thebanks' of the s and expired in the early s Wood for investmentactivity in Japan Goldstein p As a consequence banks wasseverely deflated by the collapse of the bubble Rowley the bubble Rowley p The bubble was finally punctured longer Chandler p A Because of the suffer Japanese investors are wary of thesecurities land markets and balances Frankel Morgan p Under compensating-balance arrangements corporate borrowers reported that reliance oncompensating balance accounts business were defined asthose firms with less than enterprises-those with more than million rate experience over the past five years is as banking system the Ministryof Finance announced measures to underwrite some loans from other financial institutions rather than fromprivate-sector deposits These The potentiallosses of these companies could generate a systemic proposals involve an immediate cashinjection of billion to cover part for from public funds Thepotential cost of this by trade credit dropped from percentin to percent in for early as anexample the securities house Nomura managed a billion ofFinance to allow them to form use of preferential fundingincreased from percent to percent Effects of the Merger The merger questioned because themerged bank's management has been problems in the merged institution Bank ofTokyo was a cosmopolitan thepersonnel of the former Mitsubishi Bank The Mitsubishi believe that the Bank of Tokyo hasobtained too much are as follows Assets Bank of Tokyo billion Mitsubishi institution Sender p Nevertheless uncertainty lingers with foreign banks level attained by theinstitutions in the last year to management is designed to deal withuncertainties McCabe pp The of cumulativeexperience are almost universally observable Contingency the influence of the external environment approach or some other approach to managementis employed strategy organization is a set of highly interrelated components strategic contingencyplanner must know of what cornerstone in acontingency approach Forecasting of conditions approach a variety of possible scenarios aredeveloped based on forecasted designed to dealwith uncertainties Contingency planning at the would haveeither forestalled the necessity of the merger or would of the post-mergerdisharmony A separate contingency planning department at the annually That cost however is minimal when compared to the A B Morgan P B August Deregulation sources Airline Business Galbraith J Designing Burden of bad debt Asian Wall economy of Japan Vol Cultural andsocial L December The assessment of after Japanese firms countcost of investment at bay Financial Times Thornton E Schlender B banking C Organ banks D Deregulation IV EFFECT OF Effects on banks VI EFFECTS OF MERGER A Structure B Bank of Tokyo and Mitsubishi to this event-the merger between the Banking Japan's major banks are the Japanese economy in the late s When thespeculations from the speculative boom known as the Bubble Economy and deliberate over the past years A increase in government debt as a result ofchanges in than years following the end of and bank debentures The different types of bankingfirms Few capital generationalternatives to bank financing existed for Tseo Ramos p Thispractice frees Japanese firms from the short-term enabled the keiretsu to overcome the weaknessof the allocated to new venturesthrough internal inside information thatresults in the efficient evaluation of troubledsub-unit One of the first financial reforms formal authority for a market-rate fundingmechanism for their bond purchases Frankel Morgan p These provisions of the law werethe authorizations in foreign currency In the mid s reforms were return however the commercialbanks were policies in Japan have been which adequate time isprovided to assess provide for the provision of stock brokerage Japan's financial systempermitted certain banks to underwrite securities while under criticism particularly from the securities sector Leading brokers in foreign exchange The Effect of the Bubble Economy as all such speculative booms eventually do In the late burst in following a four-year spiraling increase in The securitiesmarkets in Japan collapsed in the GovernorYasushi Mieno refused to prop up major battle to emerge from the slump Thornton Schlender pp loanyields above posted lending rates through a requirement or to maintain a good relationship bank loan contracts in to designated as citybanks During this same period the share of have declined in Japan asfinancial deregulation has Rates percent percent percent percent percent finance house purchases and subsequentlyexpanded into the commercial gross domestic product GDP One-half a prerequisite to restoring stability within the financial body Half of anylosses on by Japanesecorporate enterprises on trade credit so forth floated in thesecurities as anticipated French p Major Japanese airlinecompanies as an example preferential rate financing offered by Japan's equivalent of corporate debt equity issues increased from percent to percent Tokyo with the strong corporatelending base of the Mitsubishi will occur according to the management of ofEnglish at former Bank of Tokyo personnelbecause so many English words before the merger Sender p Comparative data for Tokyo Mitsubishi Bank Bank of Tokyo-Mitsubishi Operational activities such as a return on equity of percent by Thistarget is far equity being earned by many large NorthAmerican and European strategic decision situation as unique Andrews one way of doing something will not be equally on strategy and the influence that generates specific actions which arerequired to carry strategicmanagement are closely associated with The contingency approach to management is a means product life cycle The contingencyapproach to management however effective use is not made merge the two institutions appears to have beennone too the implementation of employee education programs at thepre-merged the Bankof Tokyo-Mitsubishi may be strategy th ed Homewood IL Dow Jones-Irwin Chandler Japan's airlines are relyingheavily on cheap preferential funding roles and behaviors Human Relations Goldstein K November At sea Imai K'i Japan's corporate networks In H Winter Failures of intermediate forms A Economic Review do Rosario L June Far Eastern H October The game changes Far a burgeoning crisis Challenge Wood C The bubble economy New event B Research purpose II JAPANESE BANKING III BANKING IN JAPAN A Focus B VIII REFERENCES BANK OF TOKYO-MITSUBISHI BANK bank is the largest in theworld with for the company Last an assessment of thecontingency planning at themselves to be caught up in and to disaster Japan's pp Thus in Japan's major s Frankel Morgan p The process of policy developments stemmedlargely from pressures external to the competition ininternational financial markets and a new emphasis administratively determined all interestrates including those on bank deposits capital markets wererequired to operate under guidelines that included strict permits thekeiretsu corporate groups to finance more than two-thirds of years as opposed to the short-term payoffs demanded by NorthAmerican keiretsu also establishedinsurance and trust companies to Organ banks are also sources of coordination within group-member firms by holding outthe threat of calling in control ofinterest rates in Japan Frankel Morgan p important tothe integrating of Japanese subject only to financialprudence guidelines and the Bank of Japan provided all in Japan has not ended the structure of financial system These loss-sharing arrangements tend to preserve reform is implemented As an example thefinancial reform the competitive positions of the smallersecurities p The Ministry of Finance decision toallow the enormous capital resources and long-established relationships withcorporations securities firms contend pp The BubbleEconomy in Japan a bubble developed in relation to asset prices-land pp These organizations suffered losses because of participation in when the FinanceMinistry of the Japanese hangover from the bursting of banks Bank Lending Activity in Japan maintaininterest-free or low-interest deposit accounts either as a for loans to small businesses declinedsteadily throughout the s subsequent million in capital which account for percent of total lending incapital-declined percent of the total lending by these banks follows Morgan Pain pp Short-Term Interest Rates percent percent of the irrecoverable debtsof the seven firms have total assets of trillion-the failure within thebanking system Thus an of the irrecoverable loans withthe remaining commitment is estimated to be an Japanese firms For large Japanesecorporate enterprises the proportion of debt bond issue forToshiba Corp Hirsch p The effects of financial foreign asset companies referred to asforeign sales companies or percent Simultaneously JAL's use ofstraight bonds between the Bank of Tokyo and the Mitsubishi Bank combinedthe unwilling to cut costs by dischargingemployees institution whereas the Mitsubishi Bank was amore personnel contendthat they cannot understand the power in the merged institution in Bank billion Bank of Tokyo-Mitsubishi Shareholders' Equity Bank of Tokyo and companies doingbusiness with the merged institution prior to the merger but it is contingency approach is amiddle ground between the situation-specific theoryrecognizes that usually no one way is the only way on strategy theinfluence of organizational variables on development is heavily dependent on environmentalconditions and on the strategic thatfunction within a dynamic environment Strategic planning the external environment of an organizationconsists and must understand must be made with respectto environmental conditions organizational conditions and contingent strategies aredeveloped for each probable scenario Obviously Bank of Tokyo and the Mitsubishi have indicated thatthe merger should have occurred earlier merged institutionshould be formed Such savings thatmay be achieved through effective andcompetition in Japanese banking Federal complex organizations th ed Reading MA Addison-Wesley Gibbons StreetJournal Weekly Hirsch M April It's bankers versus dynamics Stanford CA Stanford University perceivedenvironmental uncertainty and economic performance Human binge Far Eastern Economic Review Sender H May R December Japan's slump Fortune Tseo G K Y THE BUBBLE ECONOMY A Development Internal problems C Operational data D Operational Bank merged into asingle financial institution Sender p The two banks This researchalso examines the effects of the merger among the world's largest Woods p Unfortunately began to boomerang some of Japan's greatest banks opted forcorrupt Hardy p Banking Reform in Japan major focus of the deregulation policy has the flow of funds in Japan after the OPEC World War II the Japanesefinancial system was highly regulated Frankel and other financial service firms were legally and administrativelyrestricted to corporate enterprises in Japanduring this period The clustering obligations of stocks As a consequence both products and Japanese stock exchanges and to channel finance and budgeting systems Centralized risk and thus the efficientallocation of capital Imai p was the introduction of secondarymarkets which through the use of short-term for Japanese banks to borrow introduced that gave Japanese banksincreased access to international markets Frankel required to adhere to domestic lending policies balanced in anattempt to minimize accurately the effect of each services by Japanesebanks This approach was influenced securities housesare now allowed to contend that thenew rules heavily favor The so-called Bubble Economy of Japan developed in the decade s speculation became the byword asset prices The profitability of Japan's leading corporations and wake of the deflation of the over-inflated asset prices any Corporate profits in Japan may beexpected to continue to for borrowers tomaintain compensating deposit with theirbanks The Japan Fair Trade Commission percent of bank loan contracts in Small city bank loans made tolarge Japanese corporate proceeded Morgan Pain p Japan'sinterest As a result of pressures on the Japanese real estate market in the s using fundsraised from of these debts are thought to be irrecoverable sector as awhole The Ministry of Finance these remaining loans will be paid Frankel Morgan p The proportion of debt represented markets rose to percent by In have been able to persuade the Ministry to the Export-Import Bank in the United States Thus JAL's and the use ofcommercial bank loans dropped from percent to Bank Sender p Futureprofitability at the merged institution has been the Bank of Tokyo-Mitsubishi There are some internal facilities has become a sore point for are used Former Mitsubishi personnel the pre-merger banks together with that for themerged institution computer systems were quickly andefficiently integrated in the merged superior to the average percent banks Sender p Contingency Planning Assessment The contingency approach p and the universal approach which holds that certain laws effective in allsituations Galbraith p Contingency relationships have fourmajor links of strategy onorganizational structure systems and style Whether the contingency out a particular strategy The entire strategic processwithin an an organization's externalenvironment Gibbons pp Thus the of developingorganizational strategy Strategic forecasting is the goes beyond the forecasting of conditions In the contingency of IStechnology The contingency approach to management is effective More effective contingency planning likely institutions that could have avoided some expected to cost upwards of US C June Yen master Wall Street Journal p A Frankel at home as they race to develop newfinancial Japan starts bailing Acrossthe Board Hardy Q April Kumon S Rosovsky H Eds The political study of the Suzuki zaibatsu Organization Studies McCabe D Economic Review Rowley A January The morning Eastern EconomicReview Terazono E September Developers York AtlanticMonthly Press REFORM IN JAPAN A Regulation B Structure of Scale C Interest rates D Government intervention E MERGER Introduction In mid the assets of US billion This research examines the factorsleading up the Bank of Tokyo is presented Japanese become a part of thespeculative boom in banks found their creditworthinessthreatened by bad debt left over financialliberalization in Japan has been slow Japanese domestic banking sectoritself such as the substantial on bank capitalmanagement For more and loans as well as coupon rateson government bonds collateralrequirements for the issuance of corporate bonds theirinvestments from within the keiretsu corporate managers In-house organ banks mobilize financial resources for theirentrepreneurial ventures Retained profits were the keiretsu Lynn Rao p The organ banks possess the loans or even taking control of the Japanese banksand securities firms were given domestic money markets with internationalmarkets for Japanese corporate enterprises to financethemselves abroad through borrowing denominated fundsrequired by Japanese commercial banks In separationbetween banking and credit intermediaries Frankel Morgan p Financial liberalization a segmented system byrequiring a gradual approach to deregulation in policies introduced by the Japanese government in didnot firms in Japan In however further deregulation of crossover between the two industries is coming that they are handicapped by theirinability to deal was essentially a wildly speculative boom that eventuallycollapsed securities and practicallyeverything else Terazono p Eventually the bubble arbitrageand high-risk investments do Rosario pp central government and Bank of Japan the bubble Japan'seconomy and Japan's banks face a Traditionally Japanese banks have been able to raise effective condition ofthe formal loan contract to the initiation of bankingreform in Japan from percent of by the larger Japanese banks to percent Both short-term and long-term interest rates percent percent percent Long-Term Interest housing loan corporations Morgan Pain p Thesecompanies initially lent to equivalent of per cent of Japan's orderly liquidation of the firms has been viewedas portfolio being transferred to a new additional billion Banking deregulation in Japan also reduced the dependence represented by financialvehicles corporate bonds convertibles and liberalization in Japan however have notall been FSCs that in turn are able to qualify forthe dropped from percent to percent overseas expertise of the Bank of Neither personnel layoffs or branch closures formal institution Sender p The widespread use Japanese of the Bank of Tokyo view of the fact thatMitsubishi was the stronger bank just billion Mitsubishi Bank billion Bank of Tokyo-Mitsubishi Employees Bank of The Bank of Tokyo-Mitsubishi however expected to earn far lower thanthe to percent return on approach to management whichsees each of doing something andthat any strategy the influence ofperformance variables planning process Gibbons pp Strategic planning is a process and the contingency approach to how an organization's external environmentaffects the strategic planning process characteristics resourceavailability market dynamics and this is a process whichcould strangle strategy development if Bankprior to the decision to Further contingency planningcould have led to a department at an institution the size of contingency planning References Andrews K R The concept of corporate Reserve Bulletin French T June Tokyo woes P T January Impacts of organizational evolution onleadership brokers as Japan's Glass-Steagall starts to break down Institutional Investor Press Japan's financial scandals July Economist Lynn L H Rao Relations Morgan J Pain N February The world economy NationalInstitute Brave new bank Far Eastern Economic Review Sender Ramos E L September-October Employeeempowerment Solution to
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