Asian banks must learn from Japan<\/p>\n
HONG KONG (AFP): Banking authorities in Asian countries hit by
\ncurrency turmoil must learn from the mistakes made by Japan and
\nclean up their balance sheets, analysts said yesterday.<\/p>\n
The lesson was brought home Monday when seven years after
\nJapan's bubble economy burst, the authorities had to let Hokkaido
\nTakushoku Bank Ltd. collapse under its bad debt.<\/p>\n
Hokkaido was the country's 10th largest bank and its biggest
\nbanking failure.<\/p>\n
The news was greeted with euphoria by the Tokyo stock exchange
\nand healthy rises on bourses around the world. The view was that
\nthe Japanese authorities had at last decided to confront the
\nmounting finance problems, under pressure from major trading
\npartners worried about their impact on global growth.<\/p>\n
\"It is the final recognition that there is nowhere to hide,\"
\nsaid Philip Moffit, vice president of Tokai Asia, an investment
\nsubsidiary for a major Japanese bank.<\/p>\n
\"Japan has had practically no growth for the past seven years
\nbecause the policy makers denied there was any problem in Japan,\"
\nsaid Bruce Bernstein, chief economist for U.S. merchant bank
\nMerrill Lynch.<\/p>\n
\"It is such a big lesson for everybody else.\"<\/p>\n
\"All these problems were serious enough when they started but
\nJapan made its own problems more serious by not addressing them,\"
\ndeclared Bernstein.<\/p>\n
\"Each individual government in this region has to sit back and
\ntry to understand what happened.\"<\/p>\n
Michael Taylor, chief economist for W.I. Carr, said other
\ncountries were less likely to succumb to Japanese-style inertia.<\/p>\n
\"The reason they could afford to wait such a long time is
\nclearly because Japan enjoys a current account surplus. When you
\nface a current account deficit, you need somebody to finance
\nyou.\"<\/p>\n
Thailand, Indonesia and the Philippines have all needed
\nInternational Monetary Fund (IMF) help and been told to sort out
\ntheir banking sectors. South Korea could follow soon.<\/p>\n
The lesson from Japan, according to Phil Jones, the Tokyo
\nrepresentative for Thomson BankWatch, a credit ratings agency, is
\nthat banks must receive clear instructions on evaluating bad
\ndebts and to stop giving loans to doubtful customers.<\/p>\n
Jones said he believed that Hokkaido Takushoku \"was not
\ninsolvent until three years ago.\"<\/p>\n
\"But like all Japanese banks, it doesn't have to make full
\ndisclosure of its problem loans.<\/p>\n
\"As a proof of their solvency, they kept lending more and more
\nmoney to a number of weak clients and the problem became worse
\nevery year.\"<\/p>\n
Japan will only apply a programs called \"prompt corrective
\naction\" from April 1 1998, imposing strict bank rules on doubtful
\ndebt, he said.<\/p>\n
Major institutions like Bank of Tokyo-Mitsubishi and Sumitomo
\nBank have anticipated the reforms by posting massive losses after
\nmaking provisions.<\/p>\n
\"If it had been done five or six years ago, the floor would
\nhave been cleaned up by now,\" Jones said.<\/p>\n
He added that now it would take until the end of the 1998
\nfiscal year (which finishes in March 1999) for bad debt ratios to
\nbe restored to acceptable levels.<\/p>\n
According to Kenneth Courtis, chief economist and strategist
\nfor Deutsche Bank in Tokyo, Japanese banks have put around $250
\nbillion from revenue between 1989 and 1996 into provisions.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/asian-banks-must-learn-from-japan-1447893297",
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