Japanese Banks Halt Lending as Bounced Checks Rise to Record
By Finbarr Flynn
Aug. 19 (Bloomberg) -- Japanese banks halted transactions with 12 percent more companies in July than a year earlier, the biggest increase since May 2007, as the firms issued checks that bounced. The number of companies in the Tokyo area cut off by banks rose to a two-year high.
The banks stopped doing business with 475 companies, whose liabilities rose 35 percent to 143.8 billion yen ($1.3 billion), the Japanese Bankers Association said in a statement yesterday. Banks stop lending to and doing business with companies that bounce checks twice within a six-month period.
The construction industry accounted for the largest share of companies that couldn't meet their obligations, at 38 percent. More than half of borrowers that didn't have sufficient funds for checks issued blamed it on a decline in sales, the statement said.
Japan's two largest banks, Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., said profit declined by more than half in the first quarter ended June 30 as bad loans swelled in a slowing economy.
Urban Corp., a Japanese property developer, filed for bankruptcy on Aug. 13, becoming the country's largest corporate collapse this year with 255.8 billion yen of debt, forcing at least nine Japanese banks to say they may not be able to recover loans.
About 122 companies in Tokyo and three surrounding prefectures had their accounts suspended after checks bounced, the statement said, a 25 percent increase. The figure for companies in the Tokyo area is the highest since July 2006, the earliest for which comparable data was available. Liabilities at the companies rose 33 percent to 42.1 billion yen.
By Finbarr Flynn
Aug. 19 (Bloomberg) -- Japanese banks halted transactions with 12 percent more companies in July than a year earlier, the biggest increase since May 2007, as the firms issued checks that bounced. The number of companies in the Tokyo area cut off by banks rose to a two-year high.
The banks stopped doing business with 475 companies, whose liabilities rose 35 percent to 143.8 billion yen ($1.3 billion), the Japanese Bankers Association said in a statement yesterday. Banks stop lending to and doing business with companies that bounce checks twice within a six-month period.
The construction industry accounted for the largest share of companies that couldn't meet their obligations, at 38 percent. More than half of borrowers that didn't have sufficient funds for checks issued blamed it on a decline in sales, the statement said.
Japan's two largest banks, Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., said profit declined by more than half in the first quarter ended June 30 as bad loans swelled in a slowing economy.
Urban Corp., a Japanese property developer, filed for bankruptcy on Aug. 13, becoming the country's largest corporate collapse this year with 255.8 billion yen of debt, forcing at least nine Japanese banks to say they may not be able to recover loans.
About 122 companies in Tokyo and three surrounding prefectures had their accounts suspended after checks bounced, the statement said, a 25 percent increase. The figure for companies in the Tokyo area is the highest since July 2006, the earliest for which comparable data was available. Liabilities at the companies rose 33 percent to 42.1 billion yen.
