Bank of Japan Gov. Masaru Hayami on Monday said he does not think Japan’s major banks are short of capital, but cautioned they need to make further efforts to increase profitability.

“We think the capital adequacy ratio of Japan’s major banks (operating internationally) exceeded the 10 percent level” as shown in bank audits by the Financial Services Agency, Hayami said at a regular news conference.

The results of special FSA bank audits, released Friday, put the capital adequacy ratios between 10 percent and 11 percent.

But Hayami also said that the banks may not have sufficient capital for the disposal of nonperforming loans in the medium and long term unless they increase their profitability.

The Basel-based Bank for International Settlements requires banks operating internationally to have capital equal to 8 percent of their risk-weighted assets.

Hayami said the FSA inspections will encourage the banks to accelerate their bad-loan disposals.

The FSA said Japan’s 13 major banks will book a combined 7.8 trillion yen in loan-loss charges for fiscal 2001, compared with 6.4 trillion yen projected earlier.

The increase of 1.4 trillion yen in credit costs stems from tougher FSA audits of the banks’ books, under which they were urged to reassess the creditworthiness of some 149 major corporate borrowers.

More debt disposal

Japan’s corporate sector is expected to accelerate the disposal of excessive debts now that banks have increased writeoffs of dud loans under pressure from the Financial Services Agency, a senior government official said Monday.

“The bad-loan problem at financial institutions will now become an issue of how the industry side will accelerate the selection and consolidation of business areas,” Economy, Trade and Industry Vice Minister Katsusada Hirose told reporters.

The top ministry bureaucrat called on the business sector to take advantage of the industrial rehabilitation law, designed to help companies restructure their operations.

On Friday, the FSA said Japan’s 13 major banks will book a combined 7.8 trillion yen in loan-loss charges for fiscal 2001, up from the 6.4 trillion yen projected earlier.

The 1.4 trillion yen increase stems from FSA pressure, exerted during audits, to reclassify the creditworthiness of 149 of their major corporate borrowers.

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