EXCLUSIVE: FSA to Ease Bank Capital Rules to Promote Investment

Tokyo, April 3 (Jiji Press)–Japan’s Financial Services Agency plans to conditionally ease capital adequacy regulations for banks to encourage investment in companies, Jiji Press learned Friday. The plan is to reduce capital buffers against loss risks while still maintaining fiscal soundness, informed sources said. By revitalizing the supply of funds, the FSA aims to promote industrial reorganization and support startups and midsize companies in rural areas. The government plans to develop a new strategy for the financial sector by this summer, with deregulation of investment and loans by banks likely to be key items. Current capital requirements align with Basel III international regulations, which were introduced after the financial crisis triggered by the 2008 collapse of U.S. investment bank Lehman Brothers. They mandate capital ratios of at least 8 pct for internationally active banks and 4 pct for domestic banks. The amount of capital required is determined by the type of assets held, such as bonds and stocks, with stocks considered to carry a relatively high risk of loss. The FSA is considering easing capital regulations for joint investments by banks with government-affiliated financial institutions and funds, citing lower risk compared with regular investments. It plans to revise related systems by the end of this year. Additionally, the FSA is looking to relax restrictions on banks’ shareholding ratios, which are generally limited to 5 pct on a voting right basis. It plans to permit banks’ investment subsidiaries to take stakes exceeding 5 pct in companies undergoing management buyouts or being spun off as noncore businesses. The regulation on large-scale credit provision, which caps loans to companies at a certain proportion of a bank’s equity capital, will also be eased. END [Copyright The Jiji Press, Ltd.]