Lenders will confront Japan's Olympus Corp next week to demand an explanation for an accounting scandal engulfing the firm, a banking source said on Friday, though he denied reports that they intended to seek more security over their loans.

The disgraced maker of cameras and medical equipment faces being delisted from the stock market, and is being investigated by police and regulators, after it admitted this week to hiding investment losses for decades and using part of $1.3 billion in M&A payments to aid the cover-up.

The Nikkei newspaper said on Friday the concealment could have stood at more than 130 billion yen ($1.68 billion) at its peak, and added that Olympus's creditors were now likely to press for a change in lending terms.

But the banking source denied this was the purpose of the planned meeting between Olympus and its creditors, which include Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Mizuho Financial Group.

Delisting would effectively leave the 92-year-old company cut off from equity capital markets at a time when its shares have already lost three-quarters of their market value and its balance sheet is vulnerable to major asset writedowns.

The stock see-sawed wildly in heavy trade on Friday, losing as much as 10 percent to 435 yen in an initial wave of selling then recovering within minutes to register a small gain. It last traded at around 480 yen, down 0.8 percent on Thursday's close.

Traders said the volatility would likely persist, with buyers emerging as the stock sinks close to its book value, thought to be around 430 to 436 yen.

This is what the traders are rallying on right now and that perceived price point is creating demand, said Masayoshi Okamoto, head of dealing at Jujiya Securities.

Olympus had about 703 billion yen ($9 billion) in short-term and long-term borrowings on its books as of June 30, including corporate bonds.

'VAST NEGATIVE RAMIFICATIONS'

Tokyo's stock exchange has told Olympus it will be delisted after 62 years as a publicly traded stock if it fails to report earnings by December 14, deepening concerns about its future. Olympus says it aims to meet that deadline.

Delisting would take effect on January 15 in principle if Olympus fails to meet the reporting deadline. Even if it meets the deadline, the bourse could still decide to delist the company, depending on the scale of its past misreporting.

Olympus's largest foreign shareholder, Southeastern Asset Management, has said delisting would have vast negative ramifications for foreign investment in Japan.

The parties who are responsible for this, the past management teams and the board of directors, are the ones who need to be sanctioned and the good parts of Olympus need to be protected for the good of the public, the staff, not to mention the shareholders, Josh Shores, a principal at the fund manager, said on Thursday.

Nikkei's report on Friday said Olympus had hid its long-standing investment losses behind a facade of inflated bank deposits and securities holdings, a wall of assets which reached its peak at end-March 2005.

Quoting unnamed sources, it said Olympus had moved the impaired securities off its books -- a trick known in Japanese as tobashi -- to prevent painful writedowns that would have followed the adoption of fair value accounting in fiscal 2000.

CORPORATE GOVERNANCE GLOOM

Olympus admitted to the concealment on Tuesday, having spent weeks denying allegations by its ex-CEO of improper accounting and questionable deal-making. It said the evidence of wrongdoing had finally been unearthed by a third-party committee it had commissioned last week to probe the claims.

The Tokyo Metropolitan Police Department has begun looking into the case while, the Nikkei said, tax authorities appeared to be focused on whether any individual or corporate income was hidden as part of the cover-up of investment losses.

Olympus shares started tumbling in October after sacked CEO Michael Woodford went public with his assertions. Woodford says he was sacked for asking questions internally about several unusual M&A payments, but Olympus says he was fired for his management style and lack of understanding of Japanese culture.

The Olympus affair has also fanned broader concerns about corporate governance in Japan, which has long had its critics.

Seeking to ease those worries, Financial Services Minister Shozaburo Jimi told a news conference on Friday that the corporate governance of other listed companies should not be called into question because of Olympus.

But Olympus is not the only scandal catching attention.

Daio Paper Corp shares were untraded on Friday, having been put on the stock exchange's supervisory list the day before because Daio said it would likely miss a November 14 deadline for posting its first-half results.

Mototaka Ikawa, 47, who stepped down as Daio chairman on September 16, borrowed 10.6 billion yen ($140 million) from seven Daio subsidiaries and diverted the money to his own accounts, the firm revealed last month.

(Reporting by Soham Chatterjee in Bangalore; Writing by Linda Sieg; Editing by Mark Bendeich)