By Yuko Arayama, Panos Mourdoukoutas
Bankers in Japan and China are masters of accounting, no longer hazard administration, and American-style rescue programs will not remedy their banking crises. cleansing up stability sheets and purging non-performing loans will not paintings both, say Arayama and Mourdoukoutas. the matter is going deeper. It stems from excessive development environments and tight executive rules. the end result has been to restrict festival in Japan and put off it in China. And that ended in the keep watch over of administration habit, which weakened incentives for jap and chinese language financial institution decision-makers to regulate, hands-on, their conventional and nontraditional banking hazards. including to the matter is rationed credits, reflecting MITI and MOF priorities in Japan and people set via the relevant making plans specialists in China. eastern bankers were become specialists at the abacus, the traditional calculator, yet they've got little adventure with or figuring out of the opposite extra very important features of the banking company. Arayama and Mourdoukoutas lay all of it out in a tough, provocative, readable examine and research. it really is an important source for academicians and policymakers in enterprise, govt, and overseas finance and funding. Arayama and Mourdoukoutas make it transparent that eastern and chinese language bankers needs to find out how to behave as for-profit associations, the place managers are in charge to the proprietors and different stakeholders. moment, they have to be free of executive directives (in China) and assistance (in Japan) that regulate their daily operations, and which limit freedom to increase new items and companies. 3rd, eastern and chinese language financial institution managers needs to discover ways to act as actual bankers. they need to methods to deal with credits possibility and serve as as public buying and selling organizations. they need to additionally how one can take care of transparency and entire disclosure ideas and laws, simply as their Western opposite numbers needs to and do. In different phrases, say the authors, financial institution managers needs to "escape the abacus mentality and the best way to use their brains instead of their fingers... and that could take for much longer than worried Western observers might have expected."
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Additional resources for The Rise and Fall of Abacus Banking in Japan and China
77. 20 In fact, Japanese lending was so low in the late 1980s that the spread between lending rates and deposit rates was negative, which (as will be discussed in Chapter 4) is the root cause of the precipitation of the banking crisis. Second, high growth and low financing rates fueled corporate investment and therefore created a steady demand for corporate loans. S. 7). The demand for corporate loans was particularly strong over the period under consideration for another reason—the lack of direct financial markets where a corporation could issue equity, as had been the case in other countries, especially the United States.
For details, see OECD (1995), p. 36. 6. Sato (1998), p. 372. 7. McAlinn (1999), p. 6. 8. One reason for the slow sales of non-perfoming assets is the foreclosure procedures that require the voluntary consent of the property owner. For details, see OECD (1997), p. 46. 9. Hartcher (1998), p. 104. 10. The Economist, March 21, 1998, p. 15. 11. ‘‘Japanese Banks’’ (1998). 12. K. ’’ Newsweek, July 27, 1998, p. 19. 13. M. Friedman, ‘‘Monetary Policy Dominates,’’ Wall Street Journal, January 8, 1999. 14.
30 Equity price rises were as dramatic, especially in the bubble years. 31 In either case, as stocks and land in particular are used as loan collateral, higher prices expand the lending opportunities of banks). Wood States: So a rising stock market literally increases banks’ ability to lend. 32 Higher land and equity prices further provide another credit risk cushion for Japanese banks, in case a loan recipient does not generate sufficient cash value to repay its loans. ’’33 Simply put, as long as the assets in collateral are rising in price, banks have little to be concerned about the quality of such assets.
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