During the quarter, the bank set aside $175 million to cover future bad loans.

The proceeds from the sale would then go to the bank to cover loans.

In recent weeks, Japan's four largest banking groups set aside $44 billion to cover bad loans.

But the gain was held back by a 60 percent increase in money set aside to cover doubtful loans.

For the quarter ending Tuesday, the company said it would set aside $145 million to cover bad loans.

As expenses grew, the administration decided to cover fewer loans to cut its costs, the November letter said.

Nearly half that, $1.6 billion, will go to cover defaulted loans, Federal officials estimate.

The increase to reserves, like those at other major banks, was to cover loans to third-world countries.

Just this month, Japan's four largest banks set aside billions of dollars to cover bad loans.

The proposed regulations would still cover only federally guaranteed loans.