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Balance of derivatives contracts at 13 banks at $22.3 tril.

TOKYO, Aug. 22 Kyodo

The balance of derivatives contracts concluded by 13 major Japanese banks with contractual partners came to $22.3 trillion as of June 30 on a notional principal amount basis, up 8.0% from Dec. 31, the Bank of Japan said Friday.

Central bank officials said the sharp rise appears to have stemmed from increases in long-term interest rates in late June, which apparently prompted the banks to actively conclude derivatives contracts involving interest rate futures.

The balance of derivatives involving interest rate futures alone shot up 19.2% during the six-month period to June 30, the central bank said.

The balance of credit derivatives soared 64.2% to $22.9 billion, the central bank said.

A credit derivatives deal refers to a contract by which a bank transfers the risk of its borrowers defaulting on outstanding bank loans to its contractual partner in exchange for a fee.

The upsurge highlights the fact that Japanese banks have actively sought to reduce risk-weighted assets to push up their capital adequacy ratios, the officials said.
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Publication:Japan Weekly Monitor
Date:Aug 26, 2003
Words:176
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