Japanese top banks heavy in derivatives deals

Sept. 4, 1998 Japan's top 19 banks had 2,094 trillion yen in derivatives contracts at the end of fiscal 1996 on a notional basis, which represents the amount of principal of the assets on which such contracts are based.
The report has been presented by the Financial Supervisory Agency (FSA) to the House of Representatives ad hoc committee on financial stabilisation.

The Bank of Tokyo-Mitsubishi topped the list of derivative contract holdings with 351.8 trillion yen on March 31, 1997.
Fuji Bank came second with 250.4 trillion yen, followed by the Industrial Bank of Japan with 223.3 trillion yen, Sanwa Bank with 217.9 trillion yen, Sumitomo Bank with 207.5 trillion yen, Dai-Ichi Kangyo Bank with 192.2 trillion yen, Sakura Bank with 176.7 trillion yen and Tokai Bank with 139.1 trillion yen.
The financially troubled Long-Term Credit Bank of Japan (LTCB) came ninth with 86.2 trillion yen and other banks held derivatives contracts of less than 100 trillion yen each.
FSA chief Masaharu Hino toldthe lower house committee that the latest data on LTCB's balance sheets put its derivatives holdings at some 40 trillion yen, including 22 trillion yen signed with 130 foreign institutions.
Derivatives experts say only a small percentage of the notional value of derivatives contracts are actually settled.
According to the FSA report, most derivatives held by the Japanese banks were based on interest rate swaps.
In selling its plan to use public money to bail out LTCB, the government has said the collapse of a major bank could trigger a chain reaction because of interbank exposure in the derivatives market.
Some financial experts say, however, the case of LTCB would not be like that because the financial trouble at LTCB has long been reported.