A joint study panel of the nation’s banking and business circles will work out specific conditions under which troubled corporate borrowers can ask for debt forgiveness, including their board members’ resignation, industry sources said Saturday.

The conditions were discussed at a working-level meeting Friday of a joint task force formed by the Federation of Economic Organizations (Keidanren) and the Japanese Bankers Association to compile private-sector guidelines for banks to forgive loans to troubled corporate borrowers, according to the sources.

The nation’s biggest business lobby and the JBA launched the joint task force of financial experts and academics following the government’s emergency economic package in April, which set a two-year deadline for major banks to dispose of bad loans.

Under the April economic package, the government has pledged it will have the nation’s 16 major banks remove 12.8 trillion yen in bad loans from their balance sheets, partly through loan waivers.

The strict rules on forgiving the debts of corporate borrowers are intended to restrict easy debt-waivers, which would distort business discipline and hamper fair competition, a Keidanren source said.

The task force, chaired by Shinjiro Takagi, professor at the private Dokkyo University, will craft the interim report on the debt-waiver guidelines by the end of this month after hammering out other details, including responsibilities of shareholders and the viability of the borrowers’ rehabilitation plans, the sources said.

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