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FSA to tighten bad-loan disclosure rules: paper.

TOKYO, Sept. 23 Kyodo

Japan's Financial Supervisory Agency (FSA) will require banks to report nonperforming assets of affiliates, including nonbank finance companies, beginning in fiscal 1998, even if they own less than 5% of those firms, the Nihon Keizai Shimbun newspaper reported Wednesday.

But the decision on which affiliates' bad loans to be reported will be left up to the discretion of the banks, the daily said.

The paper said the agency has informed the Federation of Bankers Associations of Japan of the change in accounting procedure, and banks have begun preparations.

The new rule is expected to bring to light bad debts transferred to affiliates that do not have to be disclosed under current rules, the paper said.

The banks will have to report bad debts at affiliates of which they own less than 5% if the bank appoints one of its executives as the affiliate's president or if losses incurred by the affiliate have to be shouldered by the parent, the daily said.

According to an estimate by one bank official quoted by the paper, the new rule will add some 20-40 affiliates to the 30-70 consolidated subsidiaries whose bad debts are now reported by large banks, and could result in a 30-50% increase in bad debts reported.
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Publication:Japan Weekly Monitor
Date:Sep 28, 1998
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