JAPAN CRITICISED FOR "DUMPING" OF BANK SERVICES
Japan, which has been accused of dumping
everything from steel to computer microchips on world markets,
is now under attack for alleged cut-throat selling of a product
of a different sort -- banking services.
    At meetings here this week, Bank of England officials
pressed their Japanese counterparts to change regulations that
foreign bankers say give their Japanese rivals an unfair
advantage in world financial markets.
    The technical banking talks coincided with, but were
separate from, discussions between Japanese officials and
British corporate affairs minister Michael Howard, who left
Tokyo yesterday for South Korea.
    At the crux of the talks was the way regulators in various
countries measure bank capital and how much capital banks must
put up to back up their loans.
    It is generally agreed that shareholders' equity forms the
bulwark of bank capital but there is disagreement about what
else should be included.
    Some foreign bankers contend that their Japanese rivals can
undercut them on loans and other banking services because
Tokyo's capital regulations are easier to meet.
    The Japanese banks have an unfair advantage, Paul Hofer,
head of the Foreign Bankers Association of Japan, told Reuters.
    Sumitomo Bank Ltd chief economist Masahiko Koido said, "They
see us as very aggressive. We say we are just trying to catch
up with them."
    Earlier this year, the United States and Britain agreed to
adopt common regulations requiring banks to put up capital
equivalent to at least six pct of total assets. The two
countries urged others to follow suit, notably Japan.
    But Japanese Finance Ministry officials held out little
hope that would happen soon as they just introduced new
regulations governing capital ratios last May.
    Under those regulations, banks have until 1990 to attain a
capital ratio of four pct. But, in tacit recognition of
overseas pressure, the ministry set a six pct target for
Japanese banks with overseas branches.
    But foreign bankers say the rub was that it allowed Japan's
banks to count 70 pct of the value of their massive holdings of
Japanese shares - their so-called hidden reserves - as capital.
    Without the shares, big Japanese banks would only have
capital ratios of around three pct. With them, their ratios are
well above six pct, especially after the recent record-breaking
climb of Tokyo share prices.
    Western diplomats argue that the shares are valued far too
high by the ministry. Japanese banks would never be able to
realize anywhere near that amount if they were forced to sell
the shares to raise funds in an emergency, they say.
    Finance Ministry officials defended their stance by saying
that studies of the stock market over the last 30 years show
that prices have rarely fallen below the 70 pct value level.
    But the U.S. Federal Reserve seems to think otherwise.
Japanese officials say the Fed has effectively held up
applications for bank licenses by Japanese financial
institutions by asking them for a very detailed accounting of
their hidden reserves.
    The officials say Japan recently raised the issue with the
Fed through its embassy in Washington and is hoping for talks
on the subject.
 REUTER
