USA | Japanese Banks Won’t Waive $42 Billion of Tepco Loans, FT Says

Posted on July 9, 2011

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USA | BLOOMBERG | Jul 9, 2011 2:49 AM GMT+0100 

Japanese banks won’t waive loans made to Tokyo Electric Power Co. even though a government rescue plan for the utility may hinge on them doing so, the head of the Japanese Bankers Association told the Financial Times.

A debt waiver is “inconceivable,” Katsunori Nagayasu, chairman of the association, said in an interview with the paper. The comment illustrates the concern about the outlook for Tokyo Electric and its implication for Japan’s largest banks and insurers, the newspaper said.

Japan’s banks and insurance companies have made 3.4 trillion yen ($42 billion) of loans to the utility known as Tepco and may hold a large part of its 4.4 trillion yens in outstanding bonds, the newspaper said.

The government has previously suggested that the waiver of outstanding loans by Japan’s banks may be a condition for financial support of Tepco, the newspaper said. Such a move would “destabilize the financial system considerably,” Nagayasu, also president of Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest publicly traded bank, told the newspaper.

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