Japan banks to write off 79 bn in bad loans

TOKYO, FEB 13: Japan8217;s major banks are expected to write off more than nine trillion yen 79 billion or Rs 334,960 crore in non-performing loans, a financial newspaper estimated on Saturday.

Japan8217;s Financial Reconstruction Commission gave preliminary approval on Friday to 15 banks applying for public funds to receive capital injections totalling 7.45 trillion yen, and the public fund injection will spur the massive bad loan write-off, the Nihon Keizai Shimbun said, based on a survey of banks. The daily said 17 banks, including the Bank of Tokyo-Mitsubishi which did not apply for public funds, were expected to increase their equity capital by a total of about 10 trillion yen and write off more than nine trillion yen in non-performing loans. The paper did not give a specific time frame for the write-offs, but did say many banks aim to write off non-performing loans by March-end. It did not identify any of those banks.

The final amount of capital injection is still flexible, subject to further talksbetween regulators and banks over how the banks will pull themselves out of their bad loan mess, a root cause of the nation8217;s long-running economic doldrums.

Fifteen of Japan8217;s top banks, excluding the biggest, the Bank of Tokyo-Mitsubishi BTM, have sought the funds with restructuring pledges including cuts in salaries and staff, asset sales, withdrawals from overseas operations and, in some cases, mergers. BTM will recapitalise without government aid. General shareholders meetings will be held ahead ofthe corporate book closing period by March to submit their restructuring plans for approval. Data released by the Financial Supervisory Agency showed that Japan8217;s 17 biggest banks had 44.22 trillion yen of questionable and problem loans at the end of September, up from 44.09 trillion yen by March.