Nursing Asia's banks back to health is a top priority for every government in the region, but it is an awesome job.

The banking systems of South Korea, the Philippines, Indonesia, Thailand and Malaysia need fresh capital, relief from the burden of bad loans and a rash of mergers or closures.

And Japan, the region's big brother and the world's second biggest economy, is in no shape to help them out.

Banking analysts say the cost of repairing and restructuring Asia's banking sector will far exceed that of Latin America's so-called "Tequila Crisis" earlier this decade.

Asia's clean-up is expected to cost the nations involved 15 to 60 per cent of gross domestic product (GDP). The Tequila crisis cost most Latin American nations 12 to 14 per cent of GDP.

A whopping $50 billion to $80 billion in fresh capital is needed to nurse banks back to health in Asia's five worst affected economies, analysts say.

"To recapitalise the banking sector you are talking about -- in Malaysia, Philippines, Indonesia, Thailand and South Korea -- a cumulative requirement of at least $50 billion," said Stephen Weller, research director at Jardine Fleming.

But major stockbroker SG Securities has said South Korea alone needs about $54 billion, Malaysia $7.0 billion, Indonesia and Thailand $10 billion each and the Philippines $2.0 billion.

"NPLs (non-performing loans) are rising sharply across the region and destroying the balance sheets of banks," SG said in a report.

In many cases, the banks' capital adequacy ratios have slipped below the benchmark eight per cent minimum, it said.

As governments mull plans to revive the banks, balance sheets sink deeper into the red and, in some cases, toward insolvency.

South Korea's 22 commercial banks, excluding five banks being closed, posted a combined half-year net loss of 6.72 trillion won ($5.17 billion), compared with net earnings of 174 billion won a year earlier, the financial supervisory commission has said.

Thai banks made total losses of 113 billion baht ($2.76 billion) in the first half of 1998, mainly due to NPL provisions.

Philippine banks are expected to remain in the black but post lower profits this year. Merrill Lynch forecast a 13 per cent fall in Philippine banks' profits this year.

Singapore's big four banks have seen their interim profits slashed by 29 to 50 per cent, again due to bad-loan write-offs.

In Malaysia, the banks' fortunes are mixed. Its largest bank, Malayan Banking, is expected to report up to a 50 per cent fall in net earnings.

Bad loans have not even peaked yet, analysts said, adding they expected NPLs in all the troubled nations to crest in 1999.

NPLs are loans for which payments have been overdue for more than three months or six months, depending on the country.

Malaysian bank NPLs are expected to rise to 27.75 per cent of total loans against 11 to 12 per cent now. NPLs range from 3.5 to 6.2 per cent for Singapore's big four banks and are estimated at between 30 and 75 per cent for Indonesian banks.

The policy response has been strong but implementations low, largely due to a lack of funds.

Most governments have sought to strengthen local banks through more capital, higher bad-loan provisions, limited exposure to property, closure of weak institutions and mergers.

All governments have set up agencies to handle the restructuring work, empowered themselves to intervene in ailing institutions and set up asset management firms to take over NPLs.

The next step is to raise funds for the programmes announced.

Thailand, Indonesia and South Korea are helped by strong IMF-sponsored aid programmes worth $17.2 billion, $41.2 billion and $58.35 billion, respectively.

Malaysia has gone it alone and has limited options. It recently abandoned a $2 billion overseas bond issue after a downgrade by international credit-rating agencies.

Thailand, too, recently postponed a $2.0 billion sovereign bond issue until market conditions improved.

South Korea is issuing bonds locally and overseas. It plans to issue 50 trillion won in public bonds -- 41 trillion for bad-loan disposal and recapitalisation and nine trillion to meet potential new demand for depositor protection.

Financial markets have called for a complete liberalisation of the banking sector and for foreigners to be allowed to own major stakes in local banks, but not everyone will let go.

While Thailand, Indonesia and the Philippines are willing to let foreign investors in with 100 per cent ownership, Malaysia is holding to its 30 per cent cap on overseas investment.

Many analysts have said governments should nationalise troubled banks, get them in shape and then privatise them again.

Investors also want more information about the banking crisis, but many governments and banks have been slow to oblige.

"In order to have confidence you've got to have disclosure. The best solution is to disclose all the dead-beats, all the people who have not paid (their loans)," said Mark Mobius, of Templeton Asset Management.

Asia's banks could take a long time to recover. Some estimate the clean-up would take three to five years.

"It's very difficult to estimate. It depends on many issues (like) how fast they can actually dispose of the assets in an environment like this, when everybody else is trying to sell the bad debts," Connie Leung, senior economist at Lehman Brothers in Tokyo, said.