JAPAN OKS PLAN TO AID CREDIT UNION

JAPAN OKS PLAN TO AID CREDIT UNION

Japanese authorities Monday announced a $2.7 billion plan, including government aid, to wind up Tokyo credit union Cosmo Shinyo Kumiai, which failed this summer after a run on its deposits.

The Bank of Japan, the Tokyo city government and Japan's deposit insurance body pledged aid to the scheme, while private financial institutions are to forgive a total of 63 billion yen ($656 million) in loans to Cosmo.Depositors will get their money back, but large depositors will be asked to give up some interest on their money.

The plan is expected to be a model for dealing with future collapses of Japan's small financial institutions, struggling under bad debt inherited from the collapse of the late 1980s "bubble economy" of inflated asset and property prices.