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To: John Chylek who wrote (9996)	10/26/1998 2:48:00 AM
From: flickerful	Respond to of 13091

Daiwa to close overseas branches ft/ 26 oct 98 By Gillian Tett in Tokyo Daiwa, one of Japan's largest commercial banks, plans to withdraw from all overseas business to avoid requirements to meet international capital adequacy standards. The bank will close its branches in London, Hong Kong, Shanghai, Seoul and Singapore and liquidate its overseas subsidiaries over the next 18 months, bank officials have said. The move is another embarrassing blow for the global ambitions of Japan's financial sector, after banks and brokers scrambled to build overseas empires during the 1980s. It also highlights the growing difficulty that Japanese banks face in meeting international capital adequacy standards, as they come under growing pressure to write off their bad loans and their capital base is eroded by falling share prices. Daiwa's management said over the weekend that they had taken the step partly to create a more streamlined business. They plan to focus on retail banking for individuals and small companies in the Osaka area where the bank has traditionally been strong. Takashi Kaiho, Daiwa president, said: "We have decided to pull out of inefficient business so that we can concentrate our resources on areas where we are competitive. Our goal is to become the strongest 'super regional' bank in the Osaka area." However, Daiwa also admitted that it wanted to by-pass international capital adequacy standards to conserve more capital for writing off its bad loans. Under Bank for International Settlements rules, banks which operate internationally need to have capital equivalent to at least 8 per cent of risk weighted assets, while their core "tier one" capital must be maintained at 4 per cent or more. However, banks which restrict themselves to domestic operations in Japan are only required to maintain a capital adequacy ratio of 4 per cent, under separate rules drawn up by the Financial Supervisory Agency, Japan's financial watchdog. Daiwa reported a BIS ratio of 10.29 per cent in March this year, the highest level of any commercial bank. However, the decline in the Nikkei 225, the key stock-market indicator, is believed to have left it holding ¥456bn (£2.4bn) of "hidden losses" - or the gap between market and book prices - on its equity portfolio. Japanese banks have traditionally counted 45 per cent of these hidden gains or losses in their BIS ratio. The government has temporarily decreed that banks can avoid reporting such losses.