Japan reels after Enron collapse

JAPANESE banks, already imploding under the weight of domestic debt, have begun to count the potentially huge cost of the Enron collapse.

Shoji Mori, commissioner of the Financial Services Agency, initially estimated that the combined losses of Japanese banks would be no more than 100 billion yen (£570m), but reports from individual banks suggested the damage could be much heavier.

Sumitomo Mitsui Banking said that it was owed 26bn yen and Bank of Tokyo Mitsubishi reported that its exposure to the failed group totalled 35.4bn yen. Last week Sanwa bank, part of UFJ Holdings, said it was owed £31m.

Further heavy losses are expected to hit Japan's five major money market fund managers, which are reported to be holders of Enron bonds once worth 40bn yen although this was less than 1% of their total assets.

There is also uncertainty over the fate of E Power Holdings, a joint venture set up last year with Orix Corp in which Enron had 75% stake.

Nikko Cordial was put on credit watch by Standard & Poor's as investors cancelled plans after the broker admitted it had invested heavily in Enron bonds.