Special bank inspections have found that the disposal of soured loans made headway toward the close of fiscal 2001.
The 13 major banks reportedly chalked up 8.4 trillion yen in losses stemming from the disposal of bad loans for the year, 1.9 trillion yen more than estimated in September.
The Financial Services Agency plans to announce the results of the inspections Friday. Those banks are then also to announce six-item financial data, including their capital-to-asset ratios, net profits from core banking operations and pretax profits or losses.
The inspections focused on 149 troubled borrowers suffering from declines in their credit ratings and stock prices.
The renewed effort will no doubt go a long way toward helping ease worries about prospects for the economy, but it remains to be seen whether the market will quickly react to the results of the inspections and send banking and other issues broadly higher.
Banking issues could remain mired at depressed levels for some time.
Under the guidelines laid out by the Bank for International Settlements, internationally active banks are required to hold a minimum of 8 percent of their assets in capital.
There is speculation that the major banks have maintained their capital adequacy ratios well above the internationally required level, somewhere close to 10 percent.
If so, the question is why did they refrain from earmarking more for loan-loss reserves?
Fears linger over the banking industry and its heavy burden of bad loans — the major factor keeping the economy from picking up.
The future prospects of the Tokyo stock market hinge largely on whether the government will follow up quickly on its Feb. 27 package of measures to fight deflation.
The package was primarily aimed at keeping stock prices afloat artificially.
The margin trading accounts show that the balance of banking issues sold short still remains at a conspicuously high level, reflecting wavering investor confidence in the domestic industry.
The market is looking to the government for quick moves to map out a sweeping tax-reduction plan, to help stimulate domestic demand and to keep the banks’ bad loans from growing further.
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