TOKYO Japan looked poised to propose new methods for curbing banks' shareholdings, a move that analysts lauded as an effective incentive for debt-laden banks to sell their stocks and become less vulnerable to market fluctuations. The daily *** Nihon Keizai Shimbun **** said on Wednesday Japan's Financial Services Agency (FSA) would propose limiting banks' shareholdings to within 100 percent of their capital and impose a higher risk weighting to portfolio shares. To complement the plan, the FSA presented to top banks a tentative blueprint of a special body that would buy some of their shareholdings. According to the draft, obtained by Reuters, the fund would purchase stocks until the end of September 2006. Details such as the time frame for setting up the body and the extent of government support were not outlined. It said banks will increase their contributions in line with their use of the stock-buying scheme, which will receive some form of government guarantee. "The added curbs may help accelerate sales of shareholdings, which should be positive for banks," said Naoko Nemoto, director of financial institution ratings at Standard & Poor's in Tokyo. The ***Nihon Keizai*** said the top financial regulator wants to raise the risk weight assigned to shareholdings to 150 percent of current market value from 100 percent. That would effectively reduce capital ratios for banks with large share portfolios. Yukiko Ohara, a senior analyst at Dresdner Kleinwort Wasserstein, said such an increase in the risk weight was a more realistic approach than lowering the outright limit on banks' shareholdings, for instance, to half of their capital. "The higher risk weight would make it easier for banks to set the level of their shareholdings depending on their financial strength," she said. "For those in fragile health, it would be an incentive to cut their shareholdings further." Top Japanese banks, including the world's biggest Mizuho Holdings, are already in a stepped-up drive to unload shares held in their corporate clients under Japan's traditional business practice aimed at cementing ties. The move is especially crucial in the months leading up to September, when banks will for the first time calculate their assets using the mark-to-market accounting method. Under that system, they will have to reflect the current market value of shareholdings, making them more vulnerable to stock price falls.