Finance Minister Hiroshi Mitsuzuka called on the banking industry Monday to take strict steps to ensure there would be no credit crunch toward the end of the year -- a situation anxiously anticipated by many small businesses.

The minister later told a news conference that the government was reviewing its plan to implement capital-to-asset ratio benchmarks for determining whether banks' are healthy. It is believed the plan, slated to begin in April, may be causing banks to hold back on lending.

Mitsuzuka summoned Naotaka Saeki, president of Sanwa Bank and chairman of the Federation of Bankers' Associations of Japan, to convey his concerns over banks' excessive caution in lending. "There should not be, under any circumstances, a situation where loans are not made smoothly, especially to sound borrowers," the finance chief said.

In response, Saeki told reporters after the meeting that he would issue a notice to all member banks to convey the ministry's request and see to it that a credit crunch be averted. "I was just notified of the request, but the industry is aware of the criticism that banks are becoming more cautious in lending, and we will look into it," he said.

Criticism is mounting in various circles, including within the ruling Liberal Democratic Party, that banks are holding back to prevent their capital-to-asset ratios from deteriorating further. There are worries that the practice will hurt small businesses in particular.

Banks with overseas operations are expected to keep their capital adequacy ratios above 8 percent, while domestic banks must top 4 percent. The tough ratios were expected to act as a new early warning system to ferret out bad banks. But Mitsuzuka said the ministry plans to release on Wednesday a program that would add "more flexibility" to this system.