The combined balance of the 16 major banks’ bad loans, classified as requiring “special attention” for recovery, soared by 1.73 trillion yen in fiscal 2000 to 6.3 trillion yen, according to a Financial Services Agency report released Thursday.

The FSA report also shows that the average capital adequacy ratio of the 16 major banks fell 0.79 points to 11.02 percent on a consolidated basis during the 12-month period through March 31.

This indicates their financial health fell well within international standards.

The Bank for International Settlements requires that banks operating internationally maintain capital equal to at least 8 percent of the value of their outstanding loans and other assets.

The report containing the FSA’s calculation based on fiscal 2000 earnings announced last week by the 16 banks was submitted to the ruling Liberal Democratic Party’s panel on financial system affairs.

Under the Financial Reconstruction Law, special attention loans are defined as those in which contractual terms were relaxed to help borrowers recover, as well as loans whose interest and principal payments have been in arrears for three months or longer.

Financial Services Minister Hakuo Yanagisawa told the House of Representatives Financial Affairs Committee the same day that he believes it is “not impossible to clear away within two years the 11.7 trillion yen in loans” by the 16 banks to bankrupt firms and those at risk of failure.

Yanagisawa was referring to the two categories that the government wants major banks to remove from their balance sheets under its April emergency economic package.

The 16 banks booked a combined loan-loss charge of over 4 trillion yen in fiscal 2000 for the two categories and the special attention loans.

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