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WASHINGTON: The US Federal Reserve said Monday it approved an arrangement in which Japan's largest bank Mitsubishi UFJ Financial Group (MUFG) would buy up to 24.9 per cent of ailing US banking giant Morgan Stanley.
The Fed said that the Japanese megabank "will not exercise a controlling interest" in Morgan Stanley under the arrangement.
MUFG and Morgan Stanley announced the outline of the deal last month.
The Japanese megabank said in a statement it would pay US$3 billion for common stock in Morgan Stanley and another US$6 billion for convertible preferred stock.
MUFG and Morgan Stanley will come up with a "concrete strategy" by June 30 next year for a global business alliance, it said, with the Japanese bank sending a director to the Wall Street firm's board.
The US financial sector is embroiled in its worst upheaval since the Great Depression on a mountain of liabilities from high-risk subprime loans, leading the US government to enact a US$700-billion bailout.
Japanese financial institutions have weathered the global financial crisis better than many of their Western peers thanks to cautious lending practices following a separate bad loan crisis a decade ago in Asia's largest economy.
- AFP/yb
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