The collapse of major department store chain Sogo Co. has "little impact" on major Japanese banks' credit ratings, Moody's Investors Service said Friday.
The development "is a long-term positive, because it will force the system to proceed toward more transparency concerning problem loans," the U.S. credit-rating agency said.
The agency said the near-term impact of Sogo's collapse may be significant for weak borrowers heavily dependent on bank support. But as most major banks have already uploaded loan-loss reserves against Sogo, "the residual financial impact on those banks should be limited," Moody's said.
But Moody's said it believes "some regional financial institutions may be affected by higher-than-expected credit costs, which may impact their ratings."
Moody's said it believes Sogo's failure "effectively breaks the precedent that a major corporation of significant size and clear indications of main bank assistance can go bankrupt, if the corporation is economically insolvent."
Sogo went under July 12 when it filed with the Tokyo District Court for protection from creditors aiming to seek rehabilitation. Its debts totaled approximately 1.87 trillion yen on a consolidated basis.