(March 14 – 10:25 ET) – One of the big reasons for Europe’s weak markets today was a move from Fitch, the international rating agency, to place the individual ratings of 19 Japanese banks on Rating Watch Negative.

Fitch made the move in response to growing concern over the impact of falling share prices and lingering asset quality problems on the banks’ capital quality, performance and prospects. The fear is that weak markets could further weaken the already tenuous position of the Japanese banking industry. Stocks of the banks themselves have suffered tremendously as a result.

Fitch says it realizes that these problems have been confronting the banks for a number of years. However, the agency is increasingly concerned that the final resolution of their severe asset quality problems will be further delayed unless there is some form of government intervention or dramatic improvement in their operating environment. “Needless to say, the situation is being exacerbated by the falling stock market, which at current levels will continue to impinge on the ability of the banks to offset ‘unexpected loan loss charges.”

Fitch says that considering the large number of highly indebted borrowers that continue to depend on the support of banks for their very survival, it expects loan loss charges to remain high relative to operating profits and equity during the year to March 2002.

“Many banks also face the daunting prospect of the introduction of mark to market accounting for investment equities from next fiscal year, which will have a direct and material impact on regulatory capital ratios for the first time in September 2001.”

Fitch notes the Long-term ratings are unaffected by this action and are generally stable in view of the strong government support.

Many large banks, including the world’s largest, Mizuho Holdings, were affected by the move. Also affected were: Asahi Bank, Ashikaga, Bank of Tokyo Mitsubishi, Bank of Yokohama, Chiba Bank, Chuo Mitsui Trust & Banking, Hokuriku Bank, Mitsubishi Trust & Banking Corporation, Mizuho, Dai-ichi Kangyo Bank, Fuji Bank, Industrial Bank of Japan, Yasuda Trust & Banking Co. Ltd, Sakura Bank, Sanwa Bank, Sumitomo Bank, Sumitomo Trust & Banking, Tokai Bank, and Toyo Trust & Banking.