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Australian Journal of Asian Law

Abstract from Volume 8 No 1 (2006)

CASE NOTE: The Long Term Credit Bank of Japan Litigation

Mitsuru Misawa LLB, LLM, MBA, PhD is Professor of Finance, Director, The Center for Japanese Global Investment and Finance, University of Hawaii.

The Long Term Credit Bank of Japan (LTCB) was one of the most aggressive lenders to real estate developers during the 1990s. Its financing activities covered the Pacific, including Australia, Vietnam, Saipan and Hawaii, as well as parts of the continental United States. Once one of Japan’s three top-ranked long-term credit banks, LTCB was placed under state control in October 1998 and collapsed under the weight of bad-loan losses in 2000. This article addresses the issue of whether the litigation that followed sufficiently pursued bank directors’ civil and criminal liabilities. Three cases that were brought to court – two involving civil liability and one criminal liability – are discussed. Bank directors were held accountable for violating their duty of care in the decisions they made regarding the various loans that ultimately failed, but directors (as individuals) had only limited resources to pay the hefty damages awarded by the courts. The real question is whether the banks themselves could be held responsible (via lender liability) in Japan. The litigation brought by EIE International against LTCB was settled in 2004; had it not been settled, it might have served as a leading case for establishing lender liability in Japan.

(2006) 8(1) Asian Law 104

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