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12 banks to book 1.9 tril. yen more in credit costs.

TOKYO, April 9 Kyodo

Ongoing special inspections will have Japan's 12 biggest banks book 1.9 trillion yen more in loan-loss charges in fiscal 2001 than they said they would when releasing midterm results last November, sources close to banking regulators said Tuesday.

On Nov. 22 and 26, when these banks released their results for the April-September first half of fiscal 2001, they said they would book a combined loan-loss charge of 6.5 trillion yen.

The additional loan-loss charges are set to push the 12 banks' eventual loan-loss charges for the fiscal year through March 31 above 8 trillion yen.

The Financial Services Agency (FSA) is set to announce the results of the special inspections on Friday.

The FSA has been examining the books of the 12 banks based on stricter classification standards concerning the creditworthiness of large corporate borrowers since last October.

FSA inspectors have since examined the appropriateness of the classification by banks of their large corporate borrowers in terms of their creditworthiness.

The sources said the FSA examined the creditability of a total of 149 large corporate borrowers which have combined liabilities of 12.9 trillion yen.

These 149 were selected on the basis of such criteria as the fall in a company's share price below its par value and cuts in credit ratings.

Of the loan figure, 10.5 trillion yen is outstanding to the four industrial sectors which have taken especially severe beatings from the early 1990s burst of the bubble economy -- large construction firms, real estate, retailers and nonbank financing firms.

More than 30 borrowers appear to have been reclassified into the categories of ''firms at risk of failure'' and ''effectively bankrupt firms,'' industry sources said.

Japanese banks usually stop providing fresh credit to a firm as soon as its creditworthiness category deteriorates into the category of ''firms at risk of failure.''

Of the 149 large corporate borrowers subjected to special inspections, 71 were subsequently reclassified into lower creditworthiness categories, the sources close to the banking regulators said.

The reclassification was conducted through discussion among bank officials in charge, FSA inspectors and accounting firms.

The FSA had banks put up greater loan-loss provisions than before for corporate borrowers whose creditworthiness classes have been reclassified into lower categories, they added.
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Publication:Japan Weekly Monitor
Date:Apr 15, 2002
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