June 30, 2017 / 6:26 AM / 7 months ago

Japan FSA announces new rules on smaller banks to contain interest-rate risk

TOKYO (Reuters) - Japan’s financial regulator said on Friday it would adopt a new rule for regional and small banks to guard against potential losses on their bond and other holdings.

Under the rule, the Financial Services Agency (FSA) will consult with each bank on how to ease the situation when potential losses on their asset holdings exceed 20 percent of their capital.

The new rule will take effect in the fiscal year starting next April, it said.

Regional banks have stepped up investment on assets vulnerable to interest-rate risk, such as foreign bonds, as their margins have been squeezed by the Bank of Japan’s negative interest rate policy.

Reporting by Takahiko Wada; Writing by Junko Fujita; Editing by Chang-Ran Kim

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