The financial watchdog agency is set to carry out a check on how 15 major banks have evaluated the status of their loans to large corporate borrowers, a top financial regulator said Thursday.

After the inspection, the Financial Services Agency, banks and auditing firms "will thoroughly discuss whether the creditworthiness categories assigned to borrowers should be changed," FSA Commissioner Shoji Mori said in a lecture in Tokyo.

"It will be impossible for us to speedily reach conclusions on such changes."

The banking industry is being rocked by debate in government circles over whether part of the 87.2 trillion yen in loans classified as "in need of attention" held by Japan's 137 banks should be reclassified as "loans to borrowers at risk of failure."

If the creditworthiness categories of many borrowers are downgraded, it would hammer the banks' profitability by obliging them to put up much more loan-loss provisions than they initially planned.

The FSA is currently devising guidelines to determine what types of corporate borrowers should be subjected to the special on-the-spot inspection.

As soon as the norms are devised, the FSA is expected to start comparing the creditworthiness categories that the banks assign with the FSA inspectors' evaluation, banking analysts said.

Commenting on growing calls by some private banking analysts for an injection of public funds to replenish banks' depleted capital base, Mori said this "is not necessary at present."

"We want banks to raise funds to boost capital on their own in order to bolster confidence in them in the financial markets," Mori said.

Sogo bill: 160 billion yen

Some 160 billion yen of public money will be spent to liquidate debts of failed department store chain operator Sogo Co., Shoji Mori, Financial Services Agency commissioner, said Thursday.

The state-run Deposit Insurance Corp. purchased some 200 billion yen in loans that Shinsei Bank, formerly the Long-Term Credit Bank of Japan, had extended to Sogo and worked to collect them.

Mori said at a lecture in Tokyo, however, that DIC successfully collected only 40 billion yen of the loans, leaving 160 billion yen as a burden the public would have to bear.