2002.11.8
(Provisional Translation)
Financial Services Agency

The Gap between Major Banks' Self-Assessment and the Result of FSA's Inspections

The Financial Services Agency (and the Financial Supervisory Agency, predecessor to the Financial Services Agency before June 2000) has been implementing inspections based on inspection manual since 2000, and is now running the second round of such inspections for major banks. Following tables show the amount of classified loans and the sum of write-offs and provisions (loan loss reserves) on an aggregated basis, resulting from two rounds of inspections.

1. Ratio of the gap for the amount of classified loans

(billion yen, %)

	Self-assessment (a)	FSA's inspection (b)	Gap (c)=(b)-(a)	Ratio of the gap to self-assessment (c)/(a)
1st round	34,611.1	47,019.7	12,408.6	35.9
2nd round	11,979.5	13,721.9	1,742.4	14.5

2. Ratio of the gap for the sum of write-offs and provisions

(billion yen, %)

	Self-assessment (a)	FSA's inspection (b)	Gap (c)=(b)-(a)	Ratio of the gap to self-assessment (c)/(a)
1st round	10,394.7	15,287.0	4,892.3	47.1
2nd round	3,401.1	4,207.4	806.3	23.7

note)

1. The distribution of the ratio of the gap to self-assessment for each major bank is as follows:
   Regarding the amount of classified loans, 5 banks posted ratios above 50%, 7 banks between 25% and 50%, and 3 banks below 25%.
   Regarding the sum of write-offs and provisions, 5 banks posted ratios above 50%, 6 banks between 25% and 50%, and 4 banks below 25%.
2. The first round of inspections covered 15 major banks over four business terms; i.e., inspecting self-assessment as of either end-March 2000, end-September 2000 (interim book-closing), end-March 2001, or end-September 2001 (interim book-closing) depending on individual banks. The second round of inspections has so far covered five out of 12 major banks, looking at the figures as of the end of September 2001 (interim book-closing) or March 2002.
3. The amount of classified loans indicates the sum of loan assets classified under category II (assets deemed to bear a higher-than-normal repayment risk), category III (assets with serious doubts about collection or value), and category IV (assets deemed to be uncollectible or without value). The sum of write-offs and provisions indicates the sum of direct write-offs which took place during the business term of inspection and the amount of provisions for loan losses at the end of the term, both calculated on the basis of total credit.