Three Japanese banks that have been asked to provide $5 billion each to a subprime support fund planned by US banks have balked at what they see as an unreasonably high figure, the Nikkei business daily reported on Saturday.
Sumitomo Mitsui Banking Corp, a unit of Sumitomo Mitsui Financial Group Inc, and Mizuho Corporate Bank, which is part of Mizuho Financial Group, appear reluctant to provide the requested amount, the Nikkei reported, without naming any sources.
Mitsubishi UFJ Financial Group, which has a US presence through its unit UnionBanCal Corp, is also expected to ask for a reduction in the amount, it added.
Bank of America, Citigroup and J.P. Morgan Chase are heading an effort to raise billions of dollars for the new fund, which will buy assets from failing structured investment vehicles (SIVs) as a way to ease turmoil in the credit markets.
The deadline for the Japanese banks to respond is next week, the Nikkei said. The banks are seen acknowledging that it is in their best interest to help their US counterparts to recover from the credit crunch triggered by subprime mortgage problems. But they realise that contributing funds without thoroughly assessing the risks would prompt objections from shareholders, the Nikkei said.
The fund has faced scepticism from market players who believe that it will buy only high-quality assets, which would do little to help weaker SIVs, which are off-balance-sheet funds banks use to buy assets like US mortgagesstments.