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What happened to Hanwa?
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November 21, 1996: 10:32 a.m. ET
Japanese bank's shutdown grew out of bad real estate loans in late 1980s
From Correspondent Bill Dorman
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NEW YORK (CNNfn) - For the first time since World War II, the Japanese government Thursday shut down a bank -- Hanwa Bank Ltd.-- and anxious depositors flocked to the scene.
The small regional bank in Wakayama, near Osaka, collapsed under the weight of bad loans. While depositors money will be returned, Hanwa Bank's business will not.
Japan's Ministry of Finance and the Bank of Japan shut down Hanwa to prevent further losses, an aggressive step that regulators may repeat elsewhere.
"Judging from the (Bank of Japan) governor's remarks and the finance minister's remarks, quite a good number of troubled financial institutions will simply be liquidated," said Masanobu Takahasi, director of Sanyo Investment Research.
Hanwa's problems grew out of the fast times of the late 1980s, a familiar story in Japan. Real estate loans went bad, but the bank tried to downplay the problems.
Earlier this month, Hanwa officials said losses through September would be about $2.5 million, but a ministry of finance audit found the actual loss topped $300 million.
Japan's financial authorities are no longer showing patience in such cases.
"This year, we've seen a change in regulations -- greater power has been given to the ministry of finance to intervene in any bank that is seen to be in severe financial difficulties," said J. Brian Waterhouse, a bank analyst at James Capel Pacific. "We're seeing a much more proactive stance being taken by the regulatory authorities."
Hanwa's failure did not shake financial markets in Tokyo, as the Nikkei closed down slightly on other factors.
Both regulators and analysts say closing the bank is a positive step toward cleaning up Japan's problem loans. Hanwa is a test case, one analyst said, but it's not likely to be the last case. 
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Japan Development Bank
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