Japanese FSA to ease standards for bad loans

The Financial Services Agency plans to ease classification standards for bad loans to help enforce a new law to promote lending, despite criticism it will cloud the actual health of financial institutions.

The plan represents a major shift in FSA policy concerning its inspections and supervision of financial institutions, which emphasized checking the risks of loans becoming uncollectible.

Instead, the FSA will allow the financial institutions themselves to decide whether the loans have soured under vague standards.

That way, according to the plan, borrowers who may have been considered too risky can still receive loans from financial institutions. It will also ease repayment terms for struggling borrowers.