It is the first time a private Japanese bank has been nationalised since World War II.

``I, as prime minister, acting on behalf of the financial revitalisation committee until its establishment, have decided to place LTCB under special public management from today,'' prime minister Keizo Obuchi said in a statement.

LTCB filed its request to be taken over under a string of bank reform laws which came into effect on Friday to deal with the banking crisis that has suffocated the world's second largest economy.

Until a financial revitalisation committee is set up in December to deal with such banking crises, Obuchi himself is in charge of deciding which banks should collapse.

``We have decided to apply based on our judgement that there are concerns that we will not be able to pay back our depositors,'' an LTCBspokesman said.

The bank, set up in 1952 to drive Japan's post-war industrial revival, has struggled this decade in the face of increasing competition and after the government dropped its long-term financing privileges.

Since collapse of the speculative bubble economy in the early 1990s, the bank's bad loans have snowballed.

Figures released on Friday by the financial supervisory agency showed a huge 19.1 per cent of its loans were bad or risky, far larger than the bank had admitted itself.

It had 160 billion yen in capital at the end of September but an unrealised capital loss of 500 billion yen.

``Financial institutions are different from other industries in the sense that they are the very foundation of society,'' Obuchi said. ``I would like them to be aware of their own social responsibility.''

The Tokyo Stock Exchange suspended trading in LTCB's stock, which closed at just two yen on Thursday.