Japan's cross-shareholding legacy: the financial impact on banks

Abstract

Japanese banks' financial results for the Fiscal Year Ending (FYE) March 2009 marked their worst performance in recent years. Although soaring loan loss charges contributed to the banks' weak performances, losses on equity securities were also a key driver. These losses have drawn renewed attention to the practice of Japanese banks owning stock in the companies to which they lend through so-called “cross-shareholdings,” and the market risk resulting from these holdings. This Asia Focus provides a brief background on the development of cross-shareholding. The report also examines some of the problems associated with shareholdings and considers measures that banks and the government have taken to unwind these shareholdings.Banks and banking - Japan ; Stockholders