Wed, Jan 22, 2003 - Page 10 News List

Japanese officials ready to inspect nation's banks

AFP , TOKYO

Japan's financial watchdog will conduct a new round of inspections of bank assets by March, an official said yesterday, as part of government efforts to force lenders to write off more bad loans.

A report said the inspection would focus on whether restructuring plans by troubled borrowers were feasible.

"It is true that we will conduct a special inspection towards the March closing and are now preparing for it," said the Financial Services Agency (FSA) official, adding that details had yet to be decided.

The Yomiuri newspaper, however, said the FSA planned to inspect the nation's 12 major banks in February and March with a new 11-member team including corporate rehabilitation experts.

Banks are under increasing pressure to reduce massive bad loans, cited as a root cause of the nation's decade-long economic stagnation.

Prime Minister Junichiro Koizumi has said he wants to halve the ratio of bad loans at major banks by March 2005.

Under the latest inspection, companies with outstanding debts of Japanese Yen 10 billion (US$85 million) or more and whose stock prices or credit ratings have sharply declined recently would be scrutinised, the paper said.

Inspectors would strictly review the rehabilitation plans of problem firms, which could result in increased bankruptcies, according to the daily.

The FSA conducted its first round of special inspections from October 2001, saying it was to "ensure an appropriate classification of borrowers and sufficient level of write-offs and provisioning" of bad loans.

The investigation covered 149 borrowers with loans totalling Japanese Yen 12.9 trillion and resulted in the downgrading of 71 borrowers with loans worth Japanese Yen 7.5 trillion, the FSA said in April last year.

Bad-loan hounds

* The Financial Services Agency conducted its first round of special inspections from October 2001.

* The investigation covered 149 borrowers with loans totalling Japanese Yen 12.9 trillion and resulted in the downgrading of 71 borrowers with loans worth Japanese Yen 7.5 trillion, the FSA said in April last year.


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