Bad loans at Japanese banks total $590b

Bad loans at Japanese banks total $590b

TOKYO (AFP): Bad loans at Japanese banks totaled 76.708 trillion yen (US$590 billion) at the end of September under revised reporting standards, the finance ministry said yesterday.

Under the previous method, the ministry said bad loans extended by Japanese banks at the end of September stood at 28.1 trillion yen ($211 billion).

The ministry previously compiled bad loans by combining the amount of bank lending to collapsed entities, loans in arrears for over six months and those with interest rates reduced below the official discount rate.

The new data, showing banks' outstanding loans categorized according to prospects of repayment, are "part of the ministry's efforts to step up information disclosure," a senior ministry official said.

The revised figure is equivalent to about 16 percent of Japan's real gross domestic product in the latest reporting year to March 1997.

It is based on reports from major nationwide commercial banks, long-term credit banks, trust banks, and regional banks.

Of the total, the ministry said 2.7 trillion yen was unrecoverable, and 8. 7 trillion yen might be unrecoverable.

The largest portion, 65.3 trillion yen, was comprised of loans which required "risk management", the ministry said.

The finance ministry said the unrecoverable debt of 2.7 trillion yen would require that banks fully write off these loans.

The 8.7 trillion yen in loans on which there is serious concern over recovery would also require some write-offs but the estimate of the final loss in this category is not known.

Doubtful loans of 65.3 trillion yen "include many loans which do not yield losses if individual banks take proper precautions over their credit management," a ministry official said.

The ministry said advances by the banks totaled 624.86 trillion yen, of which 548.16 trillion yen is deemed to be totally sound based on self-assessment by the individual banks.