Pursuit of Liability of Responsible Parties
1.Background
Against the backdrop of failed financial institutions and the use of public funds in the resolution of housing loan companies, also known as "jusen" and hereinafter thus referred to, public demand has intensified since 1996, through Diet discussions and other channels, for strict accountability of former executives of failed institutions, as well as malicious debtors who obstructed collection efforts by concealing assets despite having the capacity to settle them.
In this context, amendment to the Deposit Insurance Act in February 1998 granted the DICJ investigative authority to enforce penalties over debtors of loan claims and other assets acquired by the Resolution and Collection Bank (Supplementary Provisions, Article 14-2 and Article 24). Furthermore, the amendment in October of the same year introduced provisions (Article 37, Paragraph 3) enabling the DICJ to require reports from former officers of failed financial institutions, explicitly strengthening the framework with which to pursue their liability.
In addition, the 2021 amendment to the Deposit Insurance Act introduced a provision (Article 128-3) allowing the DICJ to purchase claims for damages against officers of failed financial institutions, even under the pay-off method of resolution. Consequently, the DICJ is now obligated to pursue the liability of such officers under this framework as well (Article 37-2).
2.Execution of Operations
Under asset purchase agreements with failed financial institutions, which RCC undertakes pursuant to entrustment from the DICJ (Supplementary Provisions, Article 10, Paragraph 1), claims for damages against officers and employees of failed financial institutions are included among the purchased assets. Accordingly, RCC, ad hoc, manages liability pursuit operations in cooperation with the DICJ.
Specifically, the DICJ conducts investigations based on materials attained from failed financial institutions and interviews with relevant officers. Based on the results of said proceedings, RCC and the DICJ hold consultations and, either jointly or independently, initiate civil litigation i.e. claims for damages arising from breaches of the duty of due care of a prudent manager and breaches of fiduciary duty, against former officers and other responsible parties.
The liabilities pursued by RCC can be broadly categorized as follows:
Responsibility for loan approval decisions
Non-loan-related liabilities (e.g., illegal dividends, retirement payments in violation of regulations)
Responsibility for asset management
Liability of auditing firms
Responsibility of parent banks for referral loans to jusen companies
Joint tort liability of beneficiaries of illegal fund outflows
3.Operational Results
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(1)Pursuit of liability of former management of the Seven Jusen companies
Since the establishment of the legal team for pursuing liability in May 1997, until the declaration of conclusion on November 29, 2000, RCC pursued liability against 43 executives of seven jusen companies, resulting in the recovery of approximately JPY 700 million in damages. -
(2)Pursuit of liability of parent banks for referral loans
To date, RCC has recovered approximately JPY 5.7 billion in damages through court settlements and civil mediations with five financial institutions. -
(3)Pursuit of liability of executives of failed financial institutions
Lawsuits for damages against executives of failed financial institutions, including those originally filed by financial administrators and later succeeded by RCC, cover 88 institutions and 130 cases. The cumulative amount of damages recovered from former management and others totals approximately JPY 12.6 billion.
The total amount recovered through claims for damages relating to (1) jusen executives, (2) parent banks' referral loan liability, and (3) executives of failed financial institutions amounts to approximately JPY 19.0 billion.
| Claims/lawsuits for damages to hold managers for the failure of financal institutions | Cumulatie toal damages collected through pursuit of civil liability （damages actually collected） |
|
|---|---|---|
|
88 financial instituions No. of lawsuits：130 |
Pursuit of mediator's liability | 5.7 billion yen |
| Pursuit of management liability | 13.3 billion yen | |
| Total | 19.0 billion yen | |