Japan is nationalizing an insolvent bank in a move viewed as step toward addressing the problems of Japan's debt-laden regional banks.
Ashikaga Bank is being taken over by the Japanese government after bank inspectors declared it insolvent.
This is the second time this year that Japan has used public funds to prop up a bank limping under a huge burden of bad debt. Japan's banking system has been in trouble since its economic bubble burst more than a decade ago.
Prime Minister Junichiro Koizumi expressed hope that the stock market would react calmly on Monday.
The prime minister says he is taking firm action to avoid confusion and to minimize the impact on markets. He says depositors should rest assured that all of their money is protected.
The Financial Services Agency says Ashikaga Bank's negative net worth is about $850 million.
Financial Services Minister Heizo Takenaka says the bank's management will be replaced and existing shareholder equity wiped out.
The Bank of Japan says it will make special loans to ensure there is no liquidity shortage. The governor of the central bank, Toshihiko Fukui, says he does not see the move as hurting the economy or other regional banks.
Japanese media are estimating that the bailout will cost more than $9 billion, although officials are releasing no figures.
Ashikaga will be the first big Japanese bank to be nationalized since the government took control of two financial institutions about five years ago. Both Long-Term Credit Bank and Nippon Credit were later sold to U.S. investment funds.
Ashikaga Bank was founded in 1895 in Tochigi Prefecture - then a center of the silk industry. The bank still dominates lending and savings in the region and some merchants are worried about the small businesses that depend on the bank for loans. It got public funds in 1998 and 1999 to help it stay afloat.
Recently, the bank got into trouble for its business ties to North Korea. From the mid-1970s until two years ago, it was the main intermediary for sending money to North Korea. When the regional government helped the bank re-capitalize several years ago, they asked the bank to cut ties with the Stalinist state.
Ashikaga Bank handles the finances of every municipality in the prefecture and the accounts of the prefectural government.
Japanese media on Sunday reported that the Bank of Tokyo-Mitsubishi, several regional lenders and foreign investors are considering taking over the bank, which has 171 branches and 3,000 employees.