Five major banking groups told the Financial Services Agency on Wednesday that they posted losses in fiscal 2002 not because their earnings deteriorated but because their stockholdings bled massive red ink.
The five filed the statement in an apparent protest at the FSA’s plan to issue an administrative order as early as this week for them to substantially boost their earnings.
They are Sumitomo Mitsui Financial Group Inc., UFJ Holdings Inc., Mitsui Trust Holdings Inc., Sumitomo Trust & Banking Co. and Mizuho Financial Group Inc.
The five said they ended up booking losses because they accelerated the disposal of bad loans and promoted the unloading of shareholdings to protect themselves against sharp falls in stock prices.
Such measures, they argued, were precisely in line with what the FSA told them to do.
The five said they will continue making efforts to improve their operations based on individual rehabilitation programs.
The FSA is preparing to issue the order for the five, which have received public funds to shore up their capital bases but booked net losses for fiscal 2002.
It will be the first time for the FSA to issue such an order to banks due to poor earnings.
The FSA has the authority to order banks to improve earnings when they fall significantly short of their numerical targets — such as profits — but it has never done so, apparently to allow banks to concentrate on getting rid of bad loans.
Japan’s major banking groups reported net losses for fiscal 2002 due to massive bad-loan disposals and the adoption of stricter calculation methods for deferred tax assets, or future tax credits.
Mizuho Financial Group, for example, posted a net loss of 2.38 trillion yen.