Tokyo, Jan. 14 (Jiji Press)–Japan’s Financial Services Agency plans to ease restrictions on large credit extensions by banks, in an effort to promote large-scale mergers and acquisitions and boost companies’ competitiveness, Jiji Press learned Wednesday. The plan is expected to be included in the government’s new growth strategy for the financial sector to be drawn up by this summer. The FSA will consider revising its supervisory guidelines to relax lending rules by the end of this year. Under the current regulations, the total amount of loans, investments, and debt guarantees that banks can extend to a single corporate group is up to 25 pct of banks’ equity capital. This is designed to prevent the failure of a major borrower from severely impacting bank management. Still, the FSA’s supervisory guidelines allow for exceptions to the lending cap if loans are deemed not to affect banks’ financial soundness. The agency plans to expand the exceptions to include loans for mergers and acquisitions requiring massive funds. The relaxed rules are expected to promote mergers and acquisitions, possibly leading to large-scale industry realignments in Japan. A group of Liberal Democratic Party lawmakers, chaired by former Prime Minister Fumio Kishida, has called for the relaxation of restrictions on large credit extensions. At a press conference last November, Junichi Hanzawa, chairman of the Japanese Bankers Association, or Zenginkyo, and president of MUFG Bank, said that he was seeking “deregulation to smoothly provide funds to business areas expected to see huge investments.” END [Copyright The Jiji Press, Ltd.]
EXCLUSIVE: Japan to Ease Bank Lending Cap Rules
