Gov`t outlines debt moratorium bill to support small businesses

TOKYO, Oct. 9 Kyodo -
A government working group on Friday drew up an outline of a bill that would
provide financial support to small companies, including a proposed conditional
moratorium on debt repayments, ruling lawmakers said.
Under the emergency legislation, the government would urge banks and other
financial institutions to freeze loan repayments by small businesses for up to
three years in an effort to improve the financial standings of firms suffering
from credit crunches as a result of the global economic slowdown, said the
lawmakers.
''We must support people's lives,'' Financial Services Minister Shizuka Kamei
told reporters. ''The government will make every effort to tackle the issue.''
Kamei was speaking after meeting with members of the working group. He added he
had approved the outline.
Both Kamei and one of his deputies who leads the study group, Senior Vice
Financial Services Minister Kohei Otsuka, declined to comment in detail on the
bill to be submitted to a Diet session possibly later this month.
Otsuka said some more works remain such as hearings from relevant government
ministries.
The vice minister said the moratorium would not be an obligation to banks and
that the government would only ask their ''efforts'' to ease lending conditions
for the struggling companies.
The comment suggests the government will stop short of implementing a
large-scale debt repayment moratorium, as originally floated by Kamei, due
apparently to opposition from the banking industry, which fears possible damage
to their business.
To dispel such concerns, the emergency policy is expected to enable the
government to offer repayment guarantees to lenders against the possible
bankruptcy of their borrowers, the lawmakers said.
The government would also ease the criteria for the Financial Services Agency
to classify bad loans held by lenders, in a move that would prevent frozen
loans from hurting their balance sheets.
The law, only effective for one year, is likely to stipulate that borrowers
must first discuss with lenders easing repayment terms such as extending
repayment deadlines. The government would offer repayment guarantees if lenders
found it difficult to accept new terms.
The government hopes many banks will agree to the request for a loan repayment
moratorium, given guarantees based on public funds.
The rescue scheme is also expected to support individuals facing difficulties
repaying home loans. The law would require lenders to soften lending conditions
for those who have lost their jobs or have had their salaries cut due to the
economic slowdown, the lawmakers said.
==Kyodo