Japan regional banks can weather foreign bond losses - regulatory official
31/03/2023 01:52
By Makiko Yamazaki and Ritsuko Shimizu
TOKYO, March 31 (Reuters) - Japanese regional lenders
will be well able to weather even "large" losses on their
foreign bond portfolios thanks to strong capital buffers, a
senior banking regulator official said, rebuffing concerns
fuelled by U.S. banking woes.
Those strong capital buffers, in tandem with a deposit base
that comes largely from households, mark Japan's tens of
regional lenders as different from the failed Silicon Valley
Bank (SVB), said Toshinori Yashiki, deputy director-general at
Japan's Financial Services Agency.
"Overseas media seem to be focusing on Japanese regional
banks in association with the SVB collapse, but I'd like to
emphasise that they are completely different," he told Reuters
in an interview.
The SVB collapse earlier this month has put Japanese
regional banks' foreign bond portfolios under investor scrutiny,
after years of ultra-low interest rates at home had driven the
lenders to pile up positions in high-yielding but relatively
safe assets elsewhere.
Analysts at SMBC Nikko Securities calculated unrealized
foreign bond losses at over 70 listed Japanese regional banks
totalling 1.4 trillion yen ($10.6 billion) at the end of last
year, the worst in decades for global bond markets.
"It is true that unrealized losses on foreign bond holdings
at some regional banks are large, but the banks have enough
capital buffers even when such losses are taken into account,"
Yashiki said.
He also said he saw no immediate need to review Japan's
regulatory framework as Japanese banks have grown resilient with
significantly improved asset quality.
But the FSA "would need to step up monitoring" in the event
of monetary policy changes at home, he noted, amid growing
expectations the Bank of Japan could eventually change course on
its ultra-loose monetary policy.
SMBC Nikko's calculation suggests if the 10-year Japanese
government bond yield were to rise to 1%, unrealized losses on
yen bonds would increase to around 4 trillion yen.
($1 = 132.7100 yen)
(Reporting by Makiko Yamazaki and Ritsuko Shimizu; Editing by
Lincoln Feast.)
((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))