Swiss bank Credit Suisse First Boston has suspended some of its employees for obstructing an inquiry in Tokyo by Japanese financial regulators.

The inquiry is part of a Japanese probe into the behaviour of a number of foreign banks, which reportedly could reveal embarrassing connections with attempts by some of Japan's own banks to conceal huge bad debts.

Sakura Bank was one of the institutions to announce hefty losses

Japan's regulators have begun taking a hard look at the role played by foreign banks in Tokyo.

For years Japanese banks have been criticised for hiding the true extent of their bad debts, totalling hundreds of billions of dollars, through clever accounting tricks.

Now it seems that some overseas banks might have helped them do it, with schemes that involved shuffling money through different accounts.

The BBC's Mark Fisher says that exactly which manouevres are legal and which are not, can often be difficult to pin down in Japan - and the banks are likely to argue they have done nothing wrong.

Credit Suisse First Boston says its employee suspensions are not connected to any such cover-up, and are related to separate dealings in shares.

It has admitted that its employees destroyed documents so that Japanese regulators could not see them.

But it said "there was no evidence of efforts to conceal derivatives transactions, or transactions involving failed Japanese financial institutions."

Crippling debt

The probe into foreign banks is part of an effort by the authorities to impose stricter standards of disclosure, and behaviour, right across the Japanese financial sector.

The bad debts of Japan's banks, many of them dating back to the boom times of the 1980s, have been a serious drag on the economy for the whole of this decade, and the authorities say they are determined to ensure such debts cannot be run up in future.

On Friday eight of Japan's biggest banks announced they had lost a total of $25bn last year because of bad debts, and they admitted that plenty of other problem loans have yet to be dealt with fully.

Top-ranked Tokyo-Mitsubishi Bank Ltd, the only major commercial bank which has not taken part in a taxpayer-financed bailout of the industry, said its parent company problem loans total 2.16 trillion yen ($17.42bn) - up from 1.86 trillion yen ($15.0bn) last September.

BTM's announcement came one day after another leading bank, Sanwa Bank Ltd, unveiled a steep parent current loss of 653.45bn yen for 1998/99, also due to mopping up bad loans.

Seven other major banks - Sumitomo Bank, Dai-Ichi Kangyo Bank, Sakura Bank, Tokai Bank, Asahi Bank, Fuji Bank, Bank of Yokohama - announced similar losses.

"It is becoming clear that the current round of restructuring undertaken by the banks will not revive their fortunes," said James Fiorillo, senior analyst at ING Barings.

"One of the more painful exercises for the financial administrators over the next six months will be an admission of the true scope of the distressed debt dilemma in Japan."

The Japanese government, udner pressure from the international economy, has pumped billions into a rescue package for its banks.

Their bad debts - accumulated during the "bubble era" when Japanese property prices were rising - are thought to amount to $600bn.