Financial Services Minister Heizo Takenaka said Tuesday the Financial Services Agency will soon begin its second round of special inspections on 12 major banks to urge them to strictly assess their loan assets.
"We notified the banks yesterday of the intention to start special audits," Takenaka said during a regular news conference.
According to FSA sources, the audits will begin in early February and will mostly target companies with outstanding loans of 10 billion yen or more, and whose stock prices have fallen sharply in recent months.
Takenaka said the second round of special audits will be conducted the same way as the first the agency did between October 2001 and last March.
The previous bank audits prompted major banks to increase their loan-loss reserves.
A bank revival program unveiled last October, aimed at accelerating the disposal of bad loans, called for conducting another round of special bank audits in early 2003.
The agency will also check the companies' rehabilitation plans to see if they have made progress in improving their profitability and promoting restructuring, the FSA sources said.
The FSA will urge creditor banks to reclassify their loan assets and put up more loan-loss reserves if it finds the quality of the loans has deteriorated, according to the sources.
In its first round of inspections, the FSA examined the credibility of 149 large corporate borrowers, and banks were forced to lower the creditworthiness rating of 71 of those companies.
The FSA is expected to notify the banks of the results of the inspections by the end of April.