Hi Sankar,
Here's an excerpt from an article in the WSJ from a week ago Friday, (November 14):
Beginning next week, Japan's top 20 lenders will release
earnings for the six months ended Sept. 30 under this
country's hitherto murky disclosure standards. But the banks
will also forecast what their books will look like next March,
when Japan is scheduled to adopt the same stringent reserve
standards used by banks in the U.S. The new rules will
require banks to set aside capital against the risk of default for
even healthy loans, a prudent measure that unfortunately will
cost banks a lot of money.
Sumitomo Bank, for example, said the stricter reserve
requirement would force it to record a loss of more than $3
billion for the year ending March 31. When the bank cut its
earnings forecasts last month, credit-rating agency Standard &
Poor's immediately lowered the bank's long-term credit rating
to A-minus from A, affecting more than $8 billion in debt.
The earnings season is likely to flush out other problems.
Hokkaido Takushoku Bank Ltd. was forced to withdraw
from overseas markets this year because its write-offs
depleted capital to the point where it couldn't meet
internationally agreed-upon reserve requirements of 8% of
loans and other so-called risk assets.
Now, with the bank's balance sheet deteriorating, its officials
won't comment on rumors that the bank will need an
emergency equity injection to meet even Japan's looser 4%
capital requirement for banks that only operate domestically.
Investors will know more when the bank releases earnings
next week.
The ultimate solution, many say, lies in a move that Japan's
regulators and politicians have desperately sought to avoid:
The injection of trillions of yen in public money. As the
Nikkei average was sliding this week, eroding the value of
banks' share portfolios, the enormously unpopular subject
suddenly surfaced again in Parliament.
Kimio Yamaguchi, the director of the banking bureau at
Japan's Ministry of Finance, set the stage for the unpopular
move: "The public needs to debate this topic thoroughly," he
said. And if Japan's politicians work up the courage to move
forward, then it finally may be time to buy.
From today's REUTERS newswire:
More clouds of doubt gathered over Yamaichi on Saturday, when a Finance Ministry official said that suspicions were growing that
the brokerage had vast off-balance sheet liabilities exceeding 200 billion yen ($1.58 billion).
Atsushi Nagano, head of the ministry's securities bureau, told a news conference that the liabilities were thought to include illegal
"tobashi" or "pitching" deals, in which brokerages temporarily shift investment losses from one client to another to help a favored
customer avoid reporting losses. Full story:
yahoo.com
It seems to me that the new and imminent accounting rules are flushing out the "off-balance sheet liabilities" of Japanese financial institutions hitherto conceiled by Japan's "murky disclosure standards."
Now that these institutions are being forced to "open their Kimonos," -g- is it reasonable to expect some (or many?) big surprises?
Thanks for your contribution and insight!
Best regards, John. |
