Different Classification Results on the Same Loan: Evidence from Japanese Corporate Lending in the USA

This essay reports on cross-national differences within bank loan classification approaches, which determine the soundness of bank loans. It is based on 20 in-depth interviews carried out as part of an ongoing PhD research project. The essay first offers an overview of banking supervision under the Basel Accord and locates bank loan classification within the context of this global framework. Second, through analysis of a government-commissioned report available only in Japanese, the essay compares the two countries’ normative approaches to bank loan classification and qualitatively describes cross-national differences. The interview results support their report and reveal that Japanese bank loans booked in the USA are assessed differently by Japanese banks and the US banking authority. The findings suggest that regionally shared ways of thinking play an important role in the process of bank loan classification. The essay discusses why regionally shared ways of thinking differ between countries, and which side delivers the correct classification result. It concludes that the loan classification approach mirrors the respective social systems, including the regional ways of conducting businesses and the contents of education.