Mizuho to Slash Overseas Loans
BY MAKOTO ODA, THE ASAHI SHIMBUN
Mizuho Corporate Bank (Mizuho CB) plans to drastically cut overseas lending to cope with the credit crunch in interbank markets and protect itself against any fallout from stuttering overseas clients, sources said over the weekend.
The Tokyo-based megabank is watching anxiously as major clients continue to be battered abroad, especially in the United States, where the impact of the global financial crisis has been acute.
The lending power of Japan's megabanks has shrunk in recent months as stock prices have tumbled. The Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp. are also growing apprehensive about foreign lending.
Overseas loans are inevitably the first to be cut by the banks, which can then reduce lending in Japan--where bad loans are increasing--as a measure of last resort.
According to the sources, Mizuho CB issued a notice to its 22 overseas branches in the middle of December instructing them that:
・Between January and March this year, the balance of loans extended in dollars or other foreign currencies must be restricted to the same level as that at the end of September last year.
・Yen loans must also be restricted, in principle, to the November level.
The megabank also ordered all foreign branches to draw up plans outlining not only how they would reduce lending but also how they would terminate some loans and obtain full and immediate repayment.
The average balance of all loans made by Mizuho CB's foreign branches in the first half of fiscal 2008 (April-September) was about 9.3 trillion yen--up by about 800 billion yen from the first half of 2007.
However, in the October-December period of 2008, as the yen appreciated against the U.S. dollar and the bank began cutting back on lending, it plunged to about 5 trillion yen.
Last year, the rapid escalation in the global financial crisis and the collapse of major U.S. financial-services firms made banks reluctant to lend to other financial institutions. The resulting credit squeeze meant that it was difficult for Mizuho CB to procure dollar-denominated funds for loans.
The falling credit ratings of several overseas-based clients have left Mizuho CB with no choice but to tighten its lending policy.
"As for some of our clients, we are putting priority on calling their loans even if this leads to losing their business in the future, " said an executive of Mizuho CB. (IHT/Asahi: February 2,2009)
The Tokyo-based megabank is watching anxiously as major clients continue to be battered abroad, especially in the United States, where the impact of the global financial crisis has been acute.
The lending power of Japan's megabanks has shrunk in recent months as stock prices have tumbled. The Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp. are also growing apprehensive about foreign lending.
Overseas loans are inevitably the first to be cut by the banks, which can then reduce lending in Japan--where bad loans are increasing--as a measure of last resort.
According to the sources, Mizuho CB issued a notice to its 22 overseas branches in the middle of December instructing them that:
・Between January and March this year, the balance of loans extended in dollars or other foreign currencies must be restricted to the same level as that at the end of September last year.
・Yen loans must also be restricted, in principle, to the November level.
The megabank also ordered all foreign branches to draw up plans outlining not only how they would reduce lending but also how they would terminate some loans and obtain full and immediate repayment.
The average balance of all loans made by Mizuho CB's foreign branches in the first half of fiscal 2008 (April-September) was about 9.3 trillion yen--up by about 800 billion yen from the first half of 2007.
However, in the October-December period of 2008, as the yen appreciated against the U.S. dollar and the bank began cutting back on lending, it plunged to about 5 trillion yen.
Last year, the rapid escalation in the global financial crisis and the collapse of major U.S. financial-services firms made banks reluctant to lend to other financial institutions. The resulting credit squeeze meant that it was difficult for Mizuho CB to procure dollar-denominated funds for loans.
The falling credit ratings of several overseas-based clients have left Mizuho CB with no choice but to tighten its lending policy.
"As for some of our clients, we are putting priority on calling their loans even if this leads to losing their business in the future, " said an executive of Mizuho CB. (IHT/Asahi: February 2,2009)
Source: www.asahi.com
