First, adequate provisioning and write-offs based on appropriate assessment of the economic value of NPLs are extremely important in maintaining the financial soundness of banks. In the financial results of all banks for fiscal 2002, substantial losses were posted for the second consecutive year.
While this underlines the severe predicament of the financial system, it also illustrates the result of the efforts, by major banks in particular, to reduce their NPLs and strengthen their provisioning. Second, it has become commonly recognized that corporate revitalization is an integral part of dealing with the NPL problem.