* Authorities worried over 'sea change' in rates
* Probe covers most major, regional banks
* Yields have surged since Trump election
(Adds details, background)
By Taro Fuse and Takahiko Wada
TOKYO, Dec 16 Japanese authorities are
investigating banks' ability to manage interest-rate risk,
people involved in the discussions say, with the U.S. bond
market leading a surge in global yields that could mean problems
for banks holding large bond investments.
As bond prices have sunk, posing potential problems for the
huge debt holdings held by Japan's major and regional banks, the
Financial Services Agency has launched urgent checks on the
lenders, said the sources, who asked not to be identified as the
discussions are private.
An FSA spokesman could not immediately be reached for
The benchmark U.S. Treasury 10-year yield has
roughly doubled to about 2.6 percent since Donald Trump was
elected president last month, promising major spending increases
and tax cuts, and as the Federal Reserve raised U.S. rates on
Wednesday for the first time in a year.
The 10-year Japanese government bond yield
has been dragged into positive territory by the U.S.-led move.
This has tested the Bank of Japan's commitment to target the
yield around zero, while the widening U.S.-Japan rate spread has
boosted the dollar to its highest against the yen since
The FSA began by looking at lenders whose foreign-bond
profits had posted the biggest declines but decided to
investigate almost all the roughly 100 regional banks, as "a
surprising number of regional banks are cover for struggling
loan businesses with profits from their securities investments,"
a senior FSA official said.
The Bank for International Settlements, dubbed the central
bank for central banks, said on Sunday that markets have been
remarkably resilient to rising bond yields since Trump's
election, but that the scale of uncertainties ahead means the
adjustment will be "bumpy".
The FSA's Supervisory, Inspection, and Planning and
Coordination Bureaus are involved in the investigations into
what one official said "could be a sea change that only happens
once in several years".
(Reporting by Taro Fuse and Takahiko Wada; Editing by William