To: Worswick who wrote (9362 ) 11/13/1997 1:31:00 PM From: Tulvio Durand Respond to
Here's fodder for your ASIA thread:
INTERVIEW-IBCA sees crisis if Nikkei hits 14,000
By Fumiko Fujisaki
TOKYO, Nov 13 (Reuters) - Japan's financial system would be in a real
crisis if Tokyo's 225-share Nikkei average were to sink to the 14,000
level, forcing the
government to take steps to protect the system, Koyo Ozeki, a director
of European credit rating agency IBCA, said on Thursday.
''I think a Nikkei level of 16,000 is the bottom line to have a
reasonably comfortable life for Japanese banks,'' Ozeki told Reuters
Financial Television.
''And 15,000 will be a quite critical level because some of the banks
will have to report significant valuation losses. At the level of
14,000, probably the overall
financial situation should be described as a real crisis so probably
something should be done to avoid that situation,'' he said.
At the level of 14,000, many banks would fail to meet the the Bank for
International Settlements' (BIS) minimum international capital adequacy
ratio requirement of
eight percent because of valuation losses on shareholdings, he said.
The Nikkei 225 fell close to the 15,000 level earlier on Thursday but
had bounced back to stand 103 points higher at 15,537 by late afternoon
Tokyo.
Ozeki said that to protect the financial markets, public funds would
need to be injected into the banking system soon, via Japan's deposit
insurance system.
''The injection of public funds will be the only catalyst to protect the
financial markets.''
''The situation is severer than the jusen (failed housing loan firms)
experience (in 1995),'' he said.
A stagnant Japanese economy, the crisis in Asian markets, the fall in
the Nikkei average and the introduction of the so-called prompt
corrective action (PCA) system
have all taken their toll on the nation's banking sector this year, he
said.
Under the PCA, effective next April, capital adequacy ratios will be
used as a measure of the soundness of financial institutions, requiring
banks to undertake a far
more rigorous assessment of their loan assets and be more conservative
in setting up loan-loss reserves.
If the Nikkei index stays weak until next March, when Japanese banks
close their books for this business year, the government may allow banks
to resort to steps
such as postponing the posting of valuation losses on shareholdings
temporarily and postponing problem loan write-offs, Ozeki said.
On Tuesday, the position of Japanese banks came under fresh financial
scrutiny when the IBCA announced plans to further cut some individual
ratings and make
selective adjustments to long-term ratings.
The IBCA said in a statement that while it believes the default
probability in Japan remains very low, it is concerned that the
authorities have allowed problems in the
financial sector to linger unresolved.
A further shock, such as a sharp fall in stock prices from current
levels, would push banks, insurance companies and securities houses over
the edge and test the
authorities' competence in crisis management, it said.
