Japan to Ease Bank Capital Adequacy Requirements

Tokyo, June 8 (Jiji Press)–Japan’s Financial Services Agency announced on Monday a plan to conditionally ease capital adequacy requirements for banks in order to encourage investments in companies. For joint investments with government-backed financial institutions, which are seen as carrying lower risks than ordinary investments, the financial industry regulator will allow banks to build a lower amount of capital than the levels required as a buffer against potential losses. The agency will formally decide to revise related notifications after collecting public comments. The measure is aimed at encouraging public-private funding and supporting small regional companies, including startups. The lower capital adequacy requirement will apply to investments in startups, turnaround support companies and businesses aimed at revitalizing regional economies, and will mandate joint investments with the Development Bank of Japan or other government-affiliated lenders. The current capital adequacy rules align with the Basel III international financial regulatory framework introduced in the wake of the financial crisis triggered by the 2008 collapse of U.S. investment bank Lehman Brothers, with capital-to-asset ratios of at least 8 pct mandated for internationally active banks and at least 4 pct for domestic banks. The amount of capital required is determined by the type of assets held, with stocks considered to carry a relatively high risk of becoming worthless. END [Copyright The Jiji Press, Ltd.]