The Financial Services Agency hopes to come up with a plan by the end of the fiscal year that will contain incentives to encourage banks to speedily complete disposing of nonperforming loans, Financial Affairs Minister Hakuo Yanagisawa said Tuesday.
A massive amount of nonperforming loans has been hobbling the banking sector for 10 years now, and the danger it presents to the global economy was the subject of a joint statement issued by Group of Seven finance chiefs and central bankers over the weekend.
Yanagisawa said banks should deal with the snowballing problem by accepting outright losses and cutting loans to troubled borrowers from their balance sheets, rather than allowing the problem to fester by setting aside an increasing amount of loan-loss reserves.