Financial Services Agency chief Hakuo Yanagisawa said Friday that the FSA has virtually completed drawing up measures to help Japanese banks accelerate their direct writeoffs of bad loans.
“Discussions are proceeding smoothly, so (the measures) will be crafted by the end of the day,” Yanagisawa told a news conference.
Details of the measures will not be released until next week, after being conveyed to a meeting of the government’s task force on emergency economic measures slated for Wednesday, Yanagisawa said.
FSA officials said the agency is considering including a stipulation that banks must set deadlines for the removal of outstanding bad loans to corporate borrowers that are classified as facing possible bankruptcy or experiencing financial difficulty.
When a bank removes a bad loan from its balance sheet, the bank will usually either seize the borrower’s collateral and sell it at market value, or forgive the borrower’s debt and book huge losses.
The government is considering including in the measures a set of rules governing forgiveness of corporate debts. These rules could include making banks’ shareholders take partial responsibility, the FSA officials said.
A final draft of the measures may also include the creation of a database in which information concerning the finances of financially troubled borrowers is stored, the officials said.
Meanwhile, during Friday’s Cabinet meeting, Takeo Hiranuma, minister of economy, trade and industry, again proposed that the industrial revitalization law be applied to banks that forgive debts of companies identified under the provisions of the law, government officials said.
Hiranuma said the ministry is now talking with other relevant ministries regarding the crafting of rules under which banks that have forgiven debts will be allowed to deduct the cost of the debt waiver from their pretax profits.
He said his ministry is in similar talks aimed at having the government-backed Development Bank of Japan extend loans to finance the operational funds of companies that were designated as the subjects of the law.
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