Shinkin Central Bank’s strong liquidity backed by sticky member deposits

It has very low credit risk in its investment portfolio and loan book, says Moody's.

Shinkin Central Bank (SCB) is expected to maintain a strong liquidity profile and solid asset quality, although profitability remains weak.

The bank— which operates as a central bank for all shinkin banks in Japan— has a strong liquidity profile given that it is mostly funded through deposits upstreamed from its member shinkin banks, Moody’s Ratings said in a 23 July 2025 ratings commentary.

These deposits are sticky because they are mostly sourced from individuals and small and medium-sized enterprises, it added.

“SCB's solid asset quality reflects very low credit risk in its investment portfolio and loan book,” Moody's said, noting that most of SCB's assets are placed at the BoJ or invested in high-grade investment securities.

The nonperforming loan ratio was very low at 0.23% as of the end of March 2025.

However, the bank’s profitability is weak because one of its primary functions is to manage its member shinkin banks' excess liquidity.

As a result, SCB sticks to the conservative investment and lending policy, resulting in a focus on lower-yielding assets, Moody’s said.