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Technology Stocks : Altaba Inc. (formerly Yahoo)
AABA 19.630.0%Nov 6 4:00 PM EST
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To: Bill Harmond who wrote (3122)11/23/1997 1:48:00 AM
From: Rational  Read Replies (2) of 27307
 
William:

Where did you get this? The problems the Japanese (among other things like cross-ownership of shares) and Korean banks face are loan defaults. No government is forcing any company to pay off any loan ahead of schedule.

The Japanese and Korean governments will not ordinarily force banks to collect loans from their borrowers. Neither did I say that governments would force the companies to pay off loans.

Most Korean and Japanese banks have lost their capital because their investments in high-tech companies have gone sour. Korea is seeking an IMF bail out for $20 billion. The Central banks in these countries have capital adequacy standards that the banks must meet. In fact, to operate internationally, all banks must meet BIS capital standards.

The only ways to improve capital ratios is to cut loans by which the capita/(capital+loans) ratio will go up or to infuse more new capital. Given that capital has gotten wiped out everywhere, new capital infusion is not an option especially in Korea. Thus, banks have no option other than cutting loans. This will force banks to seek payoffs from borrowers; they have fine prints in lending terms to do so. There is also another ratio, the capital/risk-weighted assets that must be met. Without going to details, this ratio can be increased by cutting risky loans. Thus, loans that have not defaulted are the easier targets for banks to quickly improve their capital ratios.

If you are interested in these developments, you may look at news from Japan and Korea or look at the posts in "Ask Mohan about the Market" thread on SI.

Good luck with your investment.

Sankar
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