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Japan to study impact of falling interest rates on mortgage lenders-sources
January 22, 2015 / 11:32 PM / in 3 years

Japan to study impact of falling interest rates on mortgage lenders-sources

TOKYO, Jan 23 (Reuters) - Japan’s financial regulators are set to investigate the financial soundness of banks’ mortgage operations as a further decline in interest rates threatens to squeeze margins, sources familiar with the plan said this week.

The Financial Services Agency (FSA) will be asking leading banks and some regional lenders about margins and profitability of their home loans businesses in the first survey of its kind, the sources said.

Japanese government bond yields fell to a record low 0.195 percent on Tuesday, and the FSA late last year conducted stress tests on regional banks to determine how much their earnings would suffer if rates remain near record lows.

Banks are at risk of seeing a decline in earnings as the gap between what they pay for deposits and what they collect on loans and bond holdings shrinks, a side-effect of the Bank of Japan’s quantitative and qualitative easing, sources have said.

The FSA does not plan to make public the survey’s findings but may follow up with inspections if it finds banks that are particularly at risk of unprofitable mortgage lending, the sources said. (Reporting by Sumio Ito, Takahiko Wada, Taiga Uranaka; Writing by Ritsuko Ando; Editing by Jacqueline Wong)

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