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Mitsubishi Trust, Goldman Sachs sell off bad loans

Japan's Mitsubishi Trust and Banking Corp and US investment bank Goldman Sachs have started selling bad loans in securitized form to domestic investors, a press report said yesterday.

It is the first time that bad loans, which have been crippling Japan's financial industry since the burst of the "bubble economy" investment boom of the late 1980's, have been securitised on a trust basis, Jiji Press said.

The formula proved effective in solving bad loan problems involving savings and loan associations in the US in the early 1990's, the news agency said.

There has been a case of securitising bad loans in Japan when a special-purpose company was founded to issue asset-based securities, Jiji said

By securitizing bank loans and credit receivables, financial institutions can remove bank assets from their balance sheet, improving their financial outlook.
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