Chuo Mitsui Trust & Banking Co. has adopted interest rate-based criteria to clarify the definition of problem loans.
The major trust bank has set base rates at the short-term prime lending rate for loans of up to one year; the prime plus 0.3 percentage point for loans of up to three years; the prime plus 0.5 percentage point for loans of up to five years; and the long-term prime rate for loans of more than five years, bank officials said.
Loans whose contractual rates are lowered from the base rates are treated as problem loans.
Under these new parameters, Chuo Mitsui had, as of Sept. 30, 512.2 billion yen in loans with contractual terms relaxed or principal or interest payments in arrears for over three months, an increase of 41.7 billion yen over the figure six months earlier.
It also had, as of the same date, 251.1 billion yen in loans to borrowers at risk of failure, up 66.9 billion yen.
The numerical criteria are expected to answer public complaints that banks' bad-loan definitions are vague, the officials said.