TOKYO, June 8 Japan's financial regulator will
adopt a new regulation requiring regional banks to guard against
potential losses they could incur on their bond holdings from
sharp interest rate swings, the Nikkei reported on Thursday.
The step is aimed at preventing regional banks from relying
too much on revenues from bond investment and nudge them into
boosting lending, the paper said, without citing sources.
The new regulation, to be introduced from the fiscal year
ending in March 2019, will target Japan's 95 banks that do not
hold overseas operations, including Aozora Bank,
Shinsei Bank and Resona bank, the paper said.
With their margins squeezed by the Bank of Japan's negative
interest rate policy, regional banks have stepped up investment
on assets vulnerable to interest-rate risk such as foreign
Under the new regulation, the Financial Services Agency
(FSA) will issue a warning to a regional bank when estimated
losses on their bond holdings exceed 20 percent of their
capital, the paper said.
The FSA will also conduct hearings and if it sees any
problem with the bank's financial health, it will order the bank
to issue a report, the Nikkei said.
(Reporting by Leika Kihara; Editing by Shri Navaratnam)