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December 5, 2007 |
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* Japanese Government Unveil Banks' Subprime Exposures According to the Financial Services Agency, Japanese banks' total exposures to U.S. subprime mortgage backed securities and derivatives totaled JPY1.33 trillion at the end of September, writes Toshio Aritake of the Bankruptcy Law Daily. The FSA, states the report, said that the banks' latent investment losses resulting from owning the U.S. MBS at the end of September--which have yet to be written off -- totaled JPY107 billion and that the amount actually written off during the six-month ended September 30, came to JPY226 billion. The FSA official expressed to Mr. Aritake that the banks losses are likely to increase as prices of subprime-derived MBS have continued to fall since late September. An extraordinary survey, which did not cover Nomura Holdings, other securities companies, as well as Shinsei Bank and Aozora Bank, conducted by the FSA revealed that the 10 leading banks held JPY1.2 trillion worth of exposures to subprime-related securities, reports BLD. FSA conducted the survey to 10 leading banks, 111 regional banks, and 455 community and credit union-like banks. Financial Services Minister Yoshimi Watanabe, in a news conference, said that Japanese banks' exposures to subprime mortgages and derived securities are limited and can be disposed of with the banks' provisions against losses and will not pose "any serious risk to Japanese banks," notes BLD. The report added that Mr. Watanabe said he cannot comment on how to cope with the subprime troubles because it is a U.S. domestic issue. Independent banking industry analyst Yushiro Ikuyo opined to BLD that the FSA figures were smaller than the banks' earlier own estimates and is quoted as saying, "The differences between what the FSA disclosed and the banks released earlier indicates how difficult it is to accurately grasp subprime-related damages." According to Mr. Ikuyo, one reason for the differences, stemmed from the fact that the FSA survey covered the banks' investments in subprime-related securities alone, while the six banks' calculated investments were in residential mortgage-backed securities, relates BLD. One example of the difference is found in Mizuho Financial Group's figures. At the end of September, Mizuho's exposures to subprime-derived securities totaled JPY100 billion, while it held JPY800 billion worth of RMBS as a whole, including subprime-related securities, says the report. BLD says that analyst Mr. Ikuyo, said that among few options for Japanese banks to snap their business downfall is to expand overseas lending and investments, like U.S. and European banks have done and now emulated by Middle East nation banks, but is skeptical about this option. The report notes that it was the first time that the Japanese government disclosed banks' subprime exposures and losses. Mr. Ikuyo further added that the problem is that Japanese banks' losses would increase if RMBS prices decline or if U.S. property prices drop, added BLD. |
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