Smaller regional banks may need to brace for an increase in mortgage defaults as unemployment rises and the contagion from the recession spreads.
"Banks need to take steps to prevent loans to individuals from going bad, just as they do with corporate borrowers," said Nobuo Kojima, chairman of the Second Association of Regional Banks, which represents 44 lenders. "We've seen a lot of measures to support smaller companies, such as credit guarantees, but nothing much for individuals."
The nation's smaller regional lenders grant a third of their loans to individuals and face the risk of homeowners defaulting on debt after corporate bankruptcies forced more than half of the 44 banks in Kojima's association to book losses in the year that ended March 31. Defaults by individuals may crimp the banks' earnings, Masahiko Sato, an analyst at Nomura Holdings Inc. in Tokyo, said Tuesday.