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Provisional Translation
Financial Services Agency
August 2, 2002

The Status of Non Performing Loans as of the end of March 2002

1. The Status of Non Performing Loans (NPLs) under Financial Reconstruction Law (FRL)


(1)
The status of NPLs as of the end of March 2002
    The outstanding classified assets under the FRL held by all banks amounted to ¥43.2 trillion as of the end of March 2002, an increase of ¥9.6 trillion from ¥33.6 trillion as of the end of March 2001. This increase reflects severe economic conditions, an increase in ''special attention'' loans due to stricter application of the classification criteria of restructured loans by banks, and the progress in assessment of assets which timely reflected the market signals based on the implementation of the special inspections by the Financial Services Agency. While the amounts of ''special attention'' and ''doubtful'' loans substantially increased, ''bankrupt or de facto bankrupt'' loans(bankrupt loans) which have the highest risk decreased by ¥0.3 trillion because of aggressive removal of these assets from balance sheets of banks.
    (note) See the Table-4 regarding the status of Risk Management loans
  (Reference)Factors of increase/decrease of classified assets based on the FRL as of the end of Mar 2002

(2)
The transition of the amount of NPLs
    While the amount of assets classified under the FRL remained approximately at the same level during the period between March 1999* and March 2001, it substantially increased in FY2001 (March 2002) due to the aforementioned factors. Comparing the end of March 1999 and the end of March 2002, the outstanding amount has increased by ¥9.3 trillion: from ¥33.9 trillion at the end of March 1999 to ¥43.2 trillion at the end of March 2002. As far as the composition of ¥9.3 trillion is concerned, the amount of special attention loans which bare less risk among NPLs has increased every year from ¥6.2 trillion to ¥16.5 trillion (increased by ¥10.3 trillion), due to the stricter application of the criteria of restructured loans, exceeding the total increase of the NPLs under the FRL during the same period. On the contrary, the bankrupt or de facto bankrupt loans have constantly decreased, reflecting the aggressive removal of such loans from B/S, while the doubtful loans increased due to the factors such as the result of the special inspections.
    * The assessment of assets based on the FRL was introduced in March 1999.

2. The Status of Specific Allowance for Loan Loss

As of the end of March 2002, although the amount of loans for which specific allowance is required (i.e., doubtful loans and bankrupt loans of classified assets defined under the FRL, and past due loans and loans to debtors in legal bankruptcy under the Risk Management Loans) held by all banks increased by about ¥4 trillion, the amount of such allowance for loan loss amounted to ¥7.9 trillion yen, a slight increase of ¥0.7 trillion from ¥7.2 trillion as of the end of March 2001. This is because bankrupt loans that require higher rates of allowance decreased while doubtful loans (past due loans) that require relatively lower rates of allowance increased.

3. The Status of Loss on Disposal of NPLs

The loss on disposal of NPLs as of March 2002 amounted to ¥9.7 trillion, an increase of ¥3.6 trillion from March 2001.

Contact: Oki or Tanabe
Supervisory Coordination Division
TEL 03-3506-6000 (ext 3706)

Table-1 The Status of Non-Performing Loans Held by All Deposit-taking Financial Institutions (as of end-March 2002)
Table-2 The Status of Classified Assets of All Deposite-taking Financial Institutions based on the Financial Reconstruction Law (as of end-March 2002)
Table-3 Transition of the Amount of Classified Assets Based on the Financial Reconstruction Law
Table-4 The status of Risk Management Loans of All Deposit-taking Financial Institutions (as of end-March 2002)
Table-5 Loss on Disposal of Non-Performing Loans of All Banks as of end-March 2002

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