Note 2-17

(17) The transition matrix used here is from data that the Financial Services Agency published on borrowers' moves between categories from the end of March 2000 to that of March 2001. Subjected to the transition matrix were risk-managed loans based on banks' self-assessment rules that are different from NPLs as defined in the Financial Reconstruction Law for the calculation based on banks' self-assessment rules of the NPL ratio. When adopting the FSA data, we must assume 1） that the transition matrix for loans is equal to that for borrowers and 2） that the transition matrix would not change within a certain period. Since the transition matrix is not available for Special Attention loans, we assumed that Special Attention loans' share of those to borrowers need attention would remain at the same level as at the end of March 2001. Based on this assumption, we have estimated the transition of Special Attention loans.