Regulatory battle heats up over future of Japan's regional banks
07/05/2018 12:31
By Junko Fujita and Sumio Ito
TOKYO, May 7 (Reuters) - Two small Japanese banks made a
fresh appeal on Monday to be allowed to combine and pledged to
ease antitrust concerns, as a battle between two government
agencies that could shape the fate of the nation's 100-plus
struggling regional banks intensified.
Fukuoka Financial Group Inc 8354.T has been wanting to buy
Eighteenth Bank Ltd 8396.T in Nagasaki prefecture and merge it
with one of its three lenders, Shinwa Bank.
But the Fair Trade Commission (FTC), Japan's antitrust
watchdog, has objected to the takeover since 2016 on the grounds
that the merged entity would control about 70 percent of the
lending market in Nagasaki, which it says would limit customers'
choices and could lead to higher lending rates. urn:newsml:reuters.com:*:nL3N1KG2AU
The FTC, which is still reviewing the case, is concerned the
merger could create banks that are too dominant, undermine
competition and lead to the closure of bank branches in remote
areas.
Although Fukuoka Financial and Eighteenth Bank did not offer
concrete steps to reduce their share of the lending market in a
joint statement issued on Monday, they pledged the merged bank
would not raise interest rates unfairly and maintain branches in
depopulated areas.
"The merger of these two banks is the best choice for the
financial support of economies in Nagasaki," according the
statement, adding that deteriorating bank earnings would hurt
the local economy.
The country's financial regulator, the Financial Services
Agency (FSA), on the other hand, wants to promote mergers to
help lenders survive as the population shrinks. urn:newsml:reuters.com:*:nL3N1NU2CI
Last month, a report from a panel of independent members
commissioned by the FSA directly challenged the FTC's notion
that mergers would limit customer's choices and lead to higher
interest rates by saying an exemption from antitrust law should
be made to help the industry survive.
The report even suggested that Japan's antitrust policy may
need to be reviewed to adjust to the ongoing change in Japan's
economy.
"The competition law is based on the assumption that the
economy will grow but Japan is losing population much faster
than any other advanced countries," said Naoki Ohgo, an adviser
to the FSA. "I wonder whether it is reasonable to apply
traditional competition policy to the current situation."
But a senior FTC official last month ruled out the need for
applying different rules for mergers for smaller banks. "We do
not believe we need to use certain rules for growing industries
and other rules for declining industries," Akinori Yamada, FTC's
secretary general, told a media briefing.
"All we examine is the current market situation and how a
planned merger will affect the market," he added.
Fukuoka Financial and Eighteenth Bank have not specified a
target date for the merger but the pledges they made on Monday
mean they are still aiming to merge. The FTC could not be
immediately contacted for a comment late on Monday.
The outcome will signal how Japan will handle future
situations in the regional banking industry, which controls
almost half of the nation's 489 trillion yen ($4.5 trillion) in
bank lending and is the lifeblood for small businesses.
($1 = 109.2100 yen)
(Additonal reporting by Takahiko Wada; Editing by Malcolm
Foster and Muralikumar Anantharaman)
((813-6441-1840, junko.fujita@thomsonreuters.com, Reuters
Messaging:junko.fujita.reuters.com@reuters.net;))