Japanese banks need to stave off crisis

TOKYO: Central bank governor Toshihiko Fukui said Japan could see a financial crisis “at any time” unless its banking sector is fixed, adding that the country's banks are becoming more vulnerable to shocks. 

“If appropriate solutions to the problems of financial institutions are not carried out, we have to say Japan faces a situation where a so-called financial crisis could be triggered at any time,” Fukui told a parliamentary committee. 

“Japanese financial institutions are making efforts to overcome bad-loan issues and at the same time are seeking to create more highly profitable systems to strengthen their health,” he said.  

“Against that background, we have to say that financial institutions still face difficult hurdles to overcome.  

“This means the underpinnings of the Japanese financial institutions remain weak,” Fukui said. 

Fukui added that, though Japanese banks' are not yet in crisis, their immunity to shocks is declining, which threatens to set off a chain reaction throughout the sector. 

Meanwhile, Economic and Financial Affairs Minister Heizo Takenaka said the government might need to inject around 2.3 trillion yen into the Resona regional banking group to revive the ailing lender. 

“If calculated on the assumption that the injection will be made in the form of common shares, that number (2.3 trillion yen) will be needed,” he told a Lower House financial and fiscal committee. 

Resona's capital-adequacy ratio slumped to 2% after outside accountants inspected its books, from the 6% it reported for the end of March. Japanese banks must have a ratio of at least 4% to operate domestically. 

Takenaka noted 2.6 percentage points of the decline was due to a recalculation of the bank's deferred-tax assets, or expected tax credits, and another 0.4 points due to a slump in the value of its stock holdings.  

“The sharp drop in the ratio is definitely due to the change in the calculation of deferred tax assets,” he said. – AFX  

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