Japan Regional Banks Face Loan Loss Risks on Zentoshin Failure

Tokyo, July 8 (Jiji Press)–Regional banks across Japan are facing risks of their loans to credit card payment processing service firm Zentoshin, which has gone bust, becoming irrecoverable. The company based in the western Japan city of Osaka filed for bankruptcy with Osaka District Court on Monday, partly hit by a decrease in revenue during the COVID-19 pandemic. The court approved the start of bankruptcy procedures later that day. Zentoshin left liabilities totaling 125,929 million yen, making the case Japan’s biggest corporate bankruptcy of the year, according to credit research firm Teikoku Databank Ltd. On Tuesday, Towa Bank in Gunma Prefecture, eastern Japan, said that its Zentoshin loans totaling 8 billion yen are at risk of becoming uncollectible or subject to repayment delays. The bank said that the loans accounted for 8.83 pct of its consolidated net assets as of the end of March, and that it will book loan-loss provisions for the unsecured portion of 5,886 million yen in the current fiscal year ending next March. San ju San Financial Group Inc. also plans to set aside loan-loss reserves for roughly 2.7 billion yen of the 5 billion yen in loans extended to Zentoshin by subsidiary San ju San Bank, which operates mainly in Mie Prefecture, central Japan. Among other regional banks, 1.5 billion yen may become uncollectible at Taiko Bank in the central prefecture of Niigata, 1.2 billion yen at Bank of Kochi in the western prefecture of Kochi and 800 million yen at Shimane Bank in Shimane Prefecture, also western Japan, according to their respective announcements. Established in 2006, Zentoshin generated commission revenue through a service in which sales proceeds were paid to credit card merchants ahead of payments from the credit card companies. END [Copyright The Jiji Press, Ltd.]