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FSA urges moratorium for quake-hit businesses

Financial regulators have called on lenders to grant a loan moratorium for businesses suffering from the March 11 earthquake, the crisis at the nuclear power plant in Fukushima Prefecture or rolling blackouts.

The Financial Services Agency on Thursday revised guidelines and allowed financial institutions to continue to classify these borrowers as "performing" even if they fall behind in debt repayments. The FSA's revised financial inspection guidelines effectively urged banks and other lenders to postpone loan repayments and not to abruptly call back loans or demand additional collateral from these borrowers.

The financial inspection manual strongly influences how financial institutions categorize borrowers. Financial institutions normally categorize borrowers as "nonperforming" if they default on loan repayments or are at risk of going bankrupt. Nonperforming borrowers are categorized into four groups ranging from "requiring monitoring" to "bankrupt."

A senior FSA official said the agency revised the manual because many businesses have suffered enormous damage from circumstances beyond their control. Still, companies may eventually fail to pay back all the debt if the quake-hit region's economy remains in the doldrums. "Even if the borrowers are given more time, it doesn't necessarily mean they can rebuild their businesses," a senior official of a major bank said.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Apr 2nd, 2011 at 12:37:51 AM EST

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