October 24, 2001	Wednesday	Shaba'an 6, 1422

TOKYO, Oct 23: Japan’s top banks have enough capital as of now and do not need fresh public funds, Yoshio Yamamoto, the head of the Japanese Bankers’ Association, said on Tuesday.

Yamamoto told a news conference that special loan-quality inspections being conducted by the Financial Service Agency, Japan’s financial regulator, will not necessarily force banks to increase their loan-loss provisions.

The FSA, whose inspections have been criticised by some analysts as too lax, is running the rule over companies whose standing in the market — as reflected in their credit ratings and the price of their bonds and shares — has fallen sharply.

The aim is to get a better handle on the risks banks are running at a time when Japan’s economy is slumping and bankruptcies are rising.

Investors are worried that banks, already weakened by mounting credit costs and the shrinking value of their massive stockholdings, will suffer a further erosion of capital if they have to put aside more provisions against problem loans.

But Yamamoto told reporters: Banks have enough capital now. If we need capital, before we think about relying on the government, we must first seek to raise funds on our own.

He said banks would increase their loan-loss provisions if the FSA inspections result in borrowers being reclassified into riskier categories. But he said it was possible that the current classification would remain unchanged.

The inspections won’t necessarily lead to higher provisions, and even a rise in credit costs won’t hurt banks’ capital adequacy ratio, Yamamoto said.

The FSA estimated that major Japanese banks had capital equivalent to 10 per cent of their assets at the end of September, comfortably above the internationally mandated minimum of eight per cent.

The government injected a total of 9.5 trillion yen into 40 banks in 1998/99, but public opinion has hardened and bank chairmen are fearful that another bail-out would cost them their jobs.

Yamamoto, who is also chairman and co-chief executive officer of Mizuho Holdings Inc, said Mizuho does not expect to raise its bad-loan provisions for the half-year that ended on September 30.

It expects to set aside $6.91 billion in such provisions for the period and 1.03 trillion yen for the full financial year to March 2002.

Yamamoto said Mizuho also had a “sufficient level” of reserves to pay dividends but he declined to say whether the bank still planned to pay first-half dividends as scheduled.

On the proposed use of the state-backed Resolution and Collection Corp to help banks get rid of bad loans, Yamamoto supported “flexible pricing” for RCC purchases of these loans.

Buying loans at book value would help the banks and their shareholders. Buying them at market value, the FSA’s preference, would help Japan’s taxpayers. Flexible pricing represents a compromise between the two positions.

Yamamoto said it was realistic to achieve a final resolution to the banks’ bad debt problems within three to five years, a goal proclaimed last week by FSA chief HakuoYanagisawa.—Reuters