MEMO FOR RECORD : (SCAPIN - 1253)
WNR/hrf
25 September 1946
1. Memo to Imperial Japanese Government from GHQ, SCAP, directs the exclusion from current and pending emergency financial and related measures of closed institutions including, at the discretion of GHQ, SCAP, affiliates and subsidiaries thereof falling within the purview of reference memoranda. It further amplifies liquidation objectives.
2. Measures enacted and pending provide in part as follows:
a. Wartime Finance Bank, Southern Development Bank, Overseas Funds Bank, Bank of Chosen, Bank of Taiwan, Chosen Colonization Bank, and United Funds Bank are included and must segregate their accounts; Bank of Konan, Chosen Trust Co., and Commercial and Industrial Bank of Taiwan are included but need not segregate accounts by virtue of their past operations; Deutsche Bank fuer Ostasien, Central Bank of Manchu, Bank of China, Manchuria Industrial Bank, Federal Reserve Bank of China, Bank of Tokyo, Central Reserve Bank of China, Banque de l'Indo-Chine, and Banque Franco-Japonaise are excluded from the "Bill of Emergency Measures regarding the Accounts of Financial Institutions. " Other closed institutions are not included.
b. "Other banks will pick up their obligations to closed financial institutions included above as belonging to the "new" account which result in those closed institutions regarding such claims at face value. However, with respect to the claims of "other" banks against those closed banks included in the "Law" they will write down their claims on such a percentage basis as is arrived at by the included closed banks' estimate of the difference between their "new" account assets and liabilities.
c. "a" and "b" above, made the closed banks under the jurisdiction of the Liquidation Branch neither "fish nor fowl", but suited solely to the whims of the Ministry of Finance.
3. With respect to the principal assets in which the Liquidation Branch is interested, such as loans, advances, real property, et cetera, and which are not included in the "new" accounts under the "Law" any action for recovery is precluded by Articles 16, 17 and 18 of the above mentioned "Laws."
4. Ultimate relief from the restrictions indicated in paragraph 3 is contemplated by a proposed "Regulation of the Law Concerning the Disposal of the Assets and Liabilities of Financial Institutions" which envisions a "Financial Institutions Reorganization Committee" which will appraise the assets periodically and with the approval of the Finance Minister will effect ultimate collection. Inasmuch as the closed institutions under the jurisdiction of the Liquidation Branch are not in process of reorganization such a provision is inapplicable.
5. Other pending measures such as the "Enterprise Reconstruction and Reorganization Bill"; "Bill Concerning the Emergency Measure for the Account of Companies"; "Bill for Reconstruction and Reorganization of Financial Institutions"; and related Ordinances and Regulations set up provisions and restrictions which preclude an orderly liquidation of closed institutions and call, for example, for a system of Special Custodians appointed from the two principal creditors and the management of debtor companies whose principal duties will be: (a) the approval of special inventories, special balance sheets and profit and loss statements based on the reappraisement of the assets and liabilities of "special accounting companies", (b) approval of the revaluation of assets, (c) approval of the distribution of "special" losses to creditors which involves the scaling down of liabilities to equal the assets after reserves and capital have been written down, (d) submission of a reorganization plan to the Minister of Finance and acceptance of the responsibility and liability for that plan. In the case of the Wartime Finance Bank alone, this would involve minute supervision of some 200 companies. Proper supervision under these provisions would require a tremendously augmented staff on the part of both the Bank of Japan and the Committee of Conservators. Further, liability for conformity to the "Laws" appears to be attached primarily to the Chairman of the Special Custodian's Committee which in the instance of closed institutions would in all probability be the representative designated for our liquidation agencies.
6. It, will be understood that, as such, the institutions closed have lost their identity in mergence with the organizations of the Committee of Conservators of Closed Institutions and the Liquidation Office of the Bank of Japan, as liquidators. The responsibilities and liabilities imposed by current and pending legislation accrues therefore, not to the closed institutions, but to the liquidating agencies. From both an administrative a legal point of view it would be physically impossible, without greatly augmented personnel, for the liquidation agencies to conform with the requirements of the legislation in question. Inasfar as is practicable in consonance with liquidation objectives, the spirit and intent of the legislation and its objectives will be adhered-to. The object of the accompanying directive is to relieve the Committee of Conservators of Closed Institutions and the Bank of Japan of the ensuing administrative and legal complexities and liabilities.
7. In the earlier stages of the legislation in question memorandum agreement dated 8 August 1946 was signed stipulating that all closed institutions would be included in the "Bill regarding the Emergency Measures to separate the Accounts of Financial Institution" but such agreement was not to be construed to include concurrence in any provisions inimical to the objectives of the Liquidation Branch. It was mutually understood that this would apply to all current and pending laws.
8. No concurrences are necessary.
9. The interests of USAFIK have been considered and are provided for in this action.
10. References:
a. Memo to Imperial Japanese Government from GHQ, SCAP, AG 091.3 (30 Sep 45) ESS, (SCAPIN 74) 30 September 1945, subject; "Closing of Colonial and Foreign Banks and Special Wartime Institutions. "
b. Memo to Imperial Japanese Government from GHQ, SCAP, AG 123 (20 Oct 45) ESS, (SCAPIN 163) 20 October 1945, subject: "Appointment of a Liquidator of Branches of: 1. Bank of Chosen, 2. Bank of Taiwan, 3. Banque Franco-Japonaise, 4. Chosen Colonization Bank, 5. Deutsche Bank fuer Ostasien."
c. Memo to Imperial Japanese Government from GHQ, SCAP, AG 004.2 (23 Nov 45) ESS/FI, (SCAPIN 334) 23 November 1945, subject: "Apointment of the Bank of Japan to take Charge of Property and Affairs of the Tokyo Branch of Banque de l'Indo-chine."
d. Memo to Imperial Japanese Government from GHQ, SCAP, AG 091.3 (18 Jan 46) ESS/FI, (SCAPIN 615) 18 January 1946, subject: "Appointment of a Committee of Conservators for Institutions closed Pursuant to Memorandum of this Headquarters, AG 091.3 (30 Sep 45) ESS."
e. Memo to Imperial Japanese Government from GHQ, SCAP, AG 004.2 (6 Feb 46) ESS/FI, (SCAPIN 707) dated 6 February 1946, subject: "Closing the Offices in Japan of the Commercial and Industrial Bank of Taiwan and the Bank of Kanan."
f. Memo to Imperial Japanese Government from GHQ, SCAP, AG 000.95 (28 Mar 46) ESS/FI, (SCAPIN 848) 28 March 1946, subject: "Closing of Offices in Japan of Subsidiaries of the South Manchuria Railway Company and Manchurian Heavy Industry Development Co. Ltd."
g. Memo for File, 8 August 1946, subject: "Bill regarding the Emergency Measures to separate the accounts of Financial Institutions."
W. N. R.
2-2447