TOKYO, June 13 Japan has no plan to set a
one-size-fits-all rule restricting regional banks from holding
government bonds, Taro Aso, minister in charge of financial
regulation, said on Tuesday.
A new regulatory framework under consideration by the
Financial Services Agency (FSA) will instead require regional
banks to ensure they do not take on excessive interest-rate risk
when extending loans or investing in government bonds, he said.
"We have absolutely no plan to uniformly restrict regional
banks from holding government bonds," Aso told parliament.
"Be it bond holdings or lending, it's important for the
banks to manage risks appropriately in doing business."
Aso said it was inevitable regional banks would continue to
invest heavily in Japanese government bonds (JGB) despite very
low returns, given weak corporate demand for funding and
ultra-low interest rates across the globe.
"Imposing a one-size-fits-all rule won't work," he said,
noting that the FSA will seek ways to nudge banks into boosting
lending that cater to the varying needs of each region.
The FSA will adopt a new rule for regional banks to guard
against potential losses they could incur on their JGB holdings
from sharp interest rate swings, people with direct knowledge of
the matter have told Reuters.
The Nikkei business daily, which first reported on the
planned new rule, said the measure was aimed at preventing
regional banks from relying too much on revenues from bond
investment and to nudge them to boost lending.
Regional banks have seen their profits hit by the BOJ's
policy guiding short-term interest rates at minus 0.1 percent
and the 10-year JGB yield around zero percent.
But analysts warn of more structural problems that cloud the
outlook for regional banks, such as a rapidly ageing population
and a lack of promising start-ups in regional Japan.
(Reporting by Leika Kihara; Editing by Eric Meijer)