- The Washington Times - Monday, February 3, 2003

A typical Japanese bank has plenty of bowing clerks and paper shufflers at cluttered desks. Just don't look for conveniences such as free 24-hour automated teller machines.
Then there's Shinsei Bank. In one corner is a Starbucks coffee counter, in another an Internet cafe where customers surf the Web and sip lattes. Perhaps more important are the ATMs, which run around the clock and charge no fee.
The first major bank to be taken over by foreign investors here called "hagetaka" or "vultures" Shinsei Bank is shaking up a tradition-bound industry and is benefiting grandly from the serious image problems that the old-style banks are battling.
Burdened with a mountain of bad debt that the government estimates at $361 billion, Japan's once mighty banks are in deep trouble and may require a public bailout. Their mismanagement is blamed, both here and abroad, for a decade-long slowdown in the world's second-largest economy.
Many are decidedly unmodern and don't appear customer-focused. For instance, they routinely charge their customers a fee of nearly $1 for using ATMs after office hours, and nearly $2 for using another bank's ATM.
Shinsei's operations contrast sharply with those of traditional counterparts. At a time when three of Japan's "Big Four" banking giants were sinking into losses, far-smaller Shinsei posted a $513 million profit for the fiscal year ended in March 2002. It rang up $218 million in profits in the first half of the current fiscal year and was preparing an initial public offering of stock sometime this year.
Japanese conservatives fear Shinsei's success, coupled with tighter government controls on the industry, heralds more takeovers.
Its name meaning "New Life," Shinsei opened in June 2000 after an international investment consortium led by New York-based Ripplewood Holdings LLC took over Long-Term Credit Bank, which was crushed by bad debts and nationalized in 1998.
A government pledge last year to more strictly monitor debt at banks has heightened concerns that another bank could wind up in foreign hands. Japanese authorities are believed to favor Sumitomo Mitsui Banking Corp., one of the Big Four, over a consortium led by Cerberus, a U.S. investment fund, in an ongoing bid for stakes in Aozora Bank, which has been open since a 1998 public bailout of the bankrupt Nippon Credit Bank.
Tim Collins, chief executive at Ripplewood, gives credit for Shinsei's revitalization to the bank's chief executive, Masamoto Yashiro, and says grumbling by his countrymen that he serves the interests of "the vultures" is unfair.
"He has done an amazing job," Mr. Collins said. "I don't understand how that remotely resembles hagetaka. It just doesn't make any sense to me."
Mr. Yashiro learned the ropes of Western retail banking in the 1990s as head of Citibank Japan, where he became familiar with computer systems far nimbler than the antiquated equipment in traditional banks.
Shinsei's clean, spare look also brings to mind American banks. The office operations are tucked away in backrooms, and customers open accounts at spacious desks.
Shinsei Bank mails a monthly account statement American-style. Japanese banks use cumbersome notebooks that are updated at ATM machines.
Mr. Yashiro has worked hard to change the mentality of the bank's workers.
He recalled a conversation with one of his veteran managers who, when asked if his bank had made money last month, said profits were calculated just twice a year.
"I said, 'How could you do business when you don't know whether or not we made money?'" he said. "Profit is seldom if ever talked about in Japanese companies."
However, Yukiko Ohara, an analyst with Credit Suisse First Boston Securities in Tokyo, warns that the same bad-debt problems that plague the old banks could start creeping up on Shinsei Bank.
"But Shinsei Bank moves fast and it does something different from the other banks," she said.
"At least its management is determined."
Japanese banks long have been suspected of lending to well-connected but unprofitable companies while holding back money from ventures that are innovative but lack influence.
Although reprimanded by the government for holding back on lending to powerful companies deep in debt, Shinsei Bank gradually is winning over Japanese who see its approach as simply smart policy.
"I like the way Mr. Yashiro thinks," says Seiichi Toda, 55, an engineer who has an account at Shinsei Bank.
"With the other banks, it's impossible to figure out what they're thinking."

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