RETAIL BANKING | Staff Reporter, Japan

Japan mulls easing restrictions on regional bank investments: report

Lenders may soon be allowed to temporarily hold over 5% in small firms.

Japan’s Council for Promotion of Regulatory Reform is said to be planning to relax restrictions on the investments of regional banks into small companies that have been struggling to find successors amidst the country's rapidly ageing population, reports The Japan News.

Also read: Japan mulls looser M&A rules to speed up regional bank mergers

The Council for Promotion of Regulatory Reform is considering the possibility of allowing regional banks to temporarily hold equity stakes of more than 5% in small firms. Through their holdings of shares, banks can help prevent businesses from shutting down as owners have more time to find successors.

Currently, the country’s regulations do not allow banks to own over 5% in non-financial firms in an effort to prevent lenders from abusing their dominant positions over clients and to boost financial health.

The council is set to present a report on the deregulation to prime minister Shinzo Abe in June.

However, regional banks are at a challenging position themselves as they struggle to achieve further gains against weakening loan demand and the ultra-low interest rate environment engineered by the central bank. Nearly half or 52 out of 106 regional banks have been hit by losses on their lending businesses in the past two years, data from the Financial Services Authority show. The FSA also expects the share of regional banks that will lose money on their core businesses set to rise to about 60% by 2025.

Photo from Japanese Wikipedia. - Transferred from ja.wikipedia to Commons., CC BY-SA 3.0 

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