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Incubator Bank of Japan declared bankruptcy today, triggering the government's 10 million yen (€93,600) government deposit insurance cap for the first time in 40 years.

The collapse of the closely held, small-business lender comes after former chairman and Japan Financial Services adviser Takeshi Kimura was charged in August for impeding a regulatory probe. The Tokyo-based
bank has about 3,300 depositors with accounts exceeding 10 million yen, financial services minister Shozaburo Jimi said at a press conference today.

Incubator Bank was ordered in May to suspend some operations by the regulator after breaching Japanese banking rules. The failure is the first since Ashikaga Bank Ltd. filed for bankruptcy in 2003 after the government suspended deposit insurance caps to prevent turmoil amid multiple bank failures.

"The Incubator Bank is a special case and quite unlike failures of the past, which were very much cases of mopping up the messes left by the bubble collapse," Yoshinobu Yamada, an analyst at Deutsche Bank AG, said in a report today.

Incubator Bank had net liabilities of 180.4 billion yen as of August 31st, Haruki Kohata, the bank's president, said at a press conference in Tokyo today.

Central bank Governor Masaaki Shirakawa said in a statement that the nation's financial system remains stable after reports of the collapse. Finance minister Yoshihiko Noda said there won't be any impact on the banking system.

What's most important is that "the bank sincerely addresses issues facing depositors," Mr Noda said at a press conference in Tokyo. "I expect the Deposit Insurance Corporation of Japan to control that and I will be watching carefully."

Incubator Bank held total deposits of 610 billion yen, assets of 494 billion yen and had lending of 448 billion yen and 829 employees as of June 30, according to the Financial Services Agency.