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Govt to pump 10 tril. yen into banks tighten short selling

Written by Writer on Tuesday, October 28th, 2008

Govt to pump 10 tril. yen into banks, tighten short selling

The Yomiuri Shimbun

The government announced a set of emergency economic pump-priming measures Monday in response to nosediving stock prices, including expanding the scale of public fund injections into banks from 2 trillion yen to 10 trillion yen.

Other pillars of the economic stimulus package are:

– Tightening controls on short selling of stocks.

– Reviewing the method of calculating banks’ capital adequacy ratio.

k Utilizing the Banks’ Shareholdings Purchase Corporation, an organization comprising financial institutions in the private sector.

As a key measure to prop up the stock market, the government will tighten controls on short selling.

When stock prices continue falling, as with the current situation, speculative short selling is highly likely to accelerate the downward market spiral.

The government will therefore ban so-called naked short selling, under which shares that have not been borrowed from brokerage firms or shareholders are sold.

The government will also relax regulations on shareholdings by banks and other financial institutions.

Currently, financial institutions are allowed to hold shares of a value not exceeding a certain level of their capital adequacy ratio.

The government also will consider resuming purchases of shares held by banks by the Banks’ Shareholdings Purchase Corporation.
(Oct. 28, 2008)

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News Topics : Banks, Brokerage Firms, Capital Adequacy Ratio, Current Situation, Economic Stimulus Package, Financial Institutions, Measures, Naked, Pillars, Private Sector, Pump Priming, Selling Stocks, Shareholders, Shareholdings, Spiral, stock market, Stock Prices, Trillion, Yen, Yomiuri Shimbun