At a time when Japanese banks are struggling under a mountain of bad debt, one bank is showing others the way.

Sanwa Bank Ltd., Japan's fourth-biggest bank, has been one of its most aggressive in provisioning against bad loans and restructuring operations to cope with capital shortages.

The $418 billion-asset bank recently wrote off more than $7 billion in nonperforming loans and is rated A-plus by Fitch IBCA Ltd. That's the second-highest rating for a Japanese bank; Bank of Tokyo- Mitsubishi Ltd. is rated AA-minus.

Sanwa also became the first Japanese bank to reorganize under a U.S.- style bank holding company. The new structure includes separate units for retail banking, commercial banking, investment banking, and administration.

Minoru Eda, Sanwa's deputy president and head of global finance and investment banking, said the main goal of the reorganization is to develop a more risk/return-oriented culture, allow faster business decisions, and create a salary system based on profitability and productivity.

"Agility is the key word," Mr. Eda said.

He said Sanwa is also moving away from international business with large corporations in favor of building up retail and middle-market business in Japan.

"Spreads on loans to large corporations are small," he said. "We can't make money dealing with large companies."

To trim international expenses Sanwa is closing representative offices in Cleveland and Boston and an agency in Atlanta. However, Mr. Eda emphasized that Sanwa has no intention of selling off $7 billion-asset Sanwa Bank of California or Sanwa Business Credit Corp., Chicago.

Any future international expansion will be mainly in Asia, where Sanwa is doing business with Japanese joint ventures, local subsidiaries of Japanese companies, and better-rated local companies, he said.

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