Japan to fully privatize Shoko Chukin, lender to small, midsize firms

The Japanese government is working to fully privatize Shoko Chukin Bank, a lender to small- and medium-sized businesses, sources familiar with the matter said Monday, a move that may net the state over 100 billion yen ($755 million) in a share sale.

Even after privatization, the bank, currently about 46 percent owned by the government, will continue its crisis-response loans, which are low-interest loans offered to businesses affected by disasters, the sources said.

The government aims to submit a bill to parliament during the current session to revise the law on Shoko Chukin as it plans to sell all its shares in the government-backed lender.

Only small- and medium-sized firms and their associations will be allowed to be the lender's shareholders so the bank can maintain its mission to finance those firms.

After privatization, the lender will review the scope of its businesses, including possibly easing the limits on equity holdings and increasing the financing duration to enhance support for startups and rehabilitating businesses.

However, a privatized Shoko Chukin will continue to refrain from offering mortgages and loans to individuals as it may obstruct the business of other private lenders.

The privatization was initially decided during the administration of Prime Minister Junichiro Koizumi in the 2000s, but the process was delayed following the global financial crisis sparked by the failure of U.S. securities firm Lehman Brothers Holdings Inc. in 2008, as well as a massive 2011 earthquake and tsunami disaster in Japan.

The government issued a business improvement order to Shoko Chukin, a form of administrative punishment, after revelations in 2016 that the lender had extended emergency loans to companies that did not fulfill criteria.

A government panel of experts has been discussing the lender's privatization since December last year.

© Kyodo News