The public information rating, or 'pi' rating, on Aozora Bank Ltd. reflects its declining but still high level of problem loans and the bank's limited franchise. The rating is supported by its adequate capitalization and possible support from the government in the event of financial difficulty. During fiscal 2001 (ended March 2002), Aozora reduced its risk managed loans by 27%. At March 2002, Aozora's nonperforming loan (NPL) ratio net of reserves stood at 6.5%, which was slightly lower than the average among the major Japanese banks. However, it is significantly higher than that of its international peers. A large amount of Aozora's loan portfolio is currently covered by the government's put clause, but it is not yet clear if the
