Banks won't need public money even if 20 firms crash.

TOKYO, Sept. 21 Kyodo

Major Japanese banks can maintain sufficient capital-adequacy ratios without needing public funds, even if 20 troubled borrowers fail, Financial Services Minister Hakuo Yanagisawa said Friday.

The Financial Services Agency (FSA) estimates that large Japanese banks as a whole will maintain a capital-adequacy ratio of 10%, above the internationally required 8%, Yanagisawa told a Diet panel.

This would be the case even if they cannot recover loan losses other than those covered by collateral and loan-loss reserves in the event of the collapse of the top 20 among companies the banks categorize as requiring close watch, he said.

He revealed the estimates at a meeting of the House of Representatives Committee on Financial Affairs, in response to calls for public money injection into banks' capital so as to maintain the Japanese financial system.

Such calls have been made since last Friday, when Mycal Corp., Japan's fourth-largest supermarket chain, filed for court protection from creditors after its main bank, Dai-Ichi Kangyo Bank, pulled the plug.

Yanagisawa also said the FSA expects that the ongoing plunge in Japanese stock prices will have some negative impact on banks' adequacy ratios but they will still remain safely above the 8% requirement.

If the benchmark Nikkei Stock Average falls to 9,000, it will push down the big banks' adequacy ratios by only about 0.7 percentage point, he said.

When classifying the financial standing of corporate borrowers, the banks should pay more attention to the financial markets' assessment, such as their stock prices and credit ratings, Yanagisawa said.

The FSA will promote this aspect and check its implementation when the agency conducts special inspections of major banks under Prime Minister Junichiro Koizumi's reform programs, he said.