They are most likely to issue these in USD.
Moody's Japan K.K. says that Japan's three megabank groups need to issue approximately JPY9.3 trillion, or $81 billion, in TLAC bonds, by end-March 2022. Issuance is prompted by the implementation in Japan of enhanced minimum capital requirements for G-SIBs, which include the three megabank groups.
"The three groups -- Mitsubishi UFJ Financial Group, Inc., Mizuho Financial Group, Inc., and Sumitomo Mitsui Financial Group, Inc. -- will likely issue most of these holding company issued total loss-absorbing capacity eligible senior debt in US dollars, as they face a natural need for foreign currency funding to support their growing overseas business," says Shunsaku Sato, a Moody's Vice President and Senior Credit Officer.
"The megabanks are flush with Yen funding which they struggle to deploy profitably given near-zero domestic interest rates," says Sato. "Therefore, the groups have little incentive to procure additional funds in Yen."
Here's more from Moody's:
Furthermore, the three megabanks' TLAC bond issuance is a credit-positive development from a funding perspective because it provides longer-term US dollar funding to help finance US dollar loans which are illiquid.
Moody's further notes that the current resolution regime reduces the risk of losses on TLAC bonds. We rate the megabanks' holding company issued senior unsecured debt at the same level as their bank deposits because we believe that, under Japan's current support framework, the authorities will use preemptive support to strengthen the viability of solvent financial institutions, which will continue to service all of their debt obligations as going concerns.
As a result, government support will flow through to TLAC bond investors, and the holding companies will be able to service their TLAC bonds as long as their subsidiary banks remain operational.
However, TLAC bonds are more costly to issue than medium-term notes and cross-currency swaps. This situation reflects the TLAC bonds' longer maturities, as well as a risk premium for the fact that they are unsecured, and are issued from the holding companies, which make them structurally subordinated to direct bank obligations in the event of default.
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