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Japan Banks Log $145B in Bad Loans

July 19, 2001

TOKYO (AP) _ Japan’s 15 major banks currently have about $145 billion in bad loans and the government’s goal is to reduce the percentage of banks’ bad loans, Japan’s top financial regulator said Thursday.

Speaking at the Foreign Correspondents’ Club of Japan, Hakuo Yanagisawa said government inspections of major banks were still in progress and that it was impossible for banks to get rid of all bad loans.

However, he said that it’s the goal of the government to bring down the level of bad loans to ``normal″ levels like those in the United States.

Yanagisawa would not say exactly what was a ``normal″ ratio of non-performing loan disposals to total lending, but said that in the United States, the normal level was about 1.2 percent.

To ensure that banks act on the results of government inspections, Yanagisawa said that the his agency has decided to conduct annual inspections of banks’ earnings and also participate in onsite inspections of the compilation of banks’ earnings results.

``We will follow-up with inspections to see if banks are correcting what the government has pointed out,″ Yanagisawa said.

The minister reiterated that there wasn’t any need to pump more public funds into individual banks and that the government would use public money only if there was a systemic risk _ which he didn’t see.

He said banks that are undercapitalized need to procure funds on the market or by increasing their retained earnings. If the institutions can’t help themselves, he added, then, they ought to exit the market.

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