July 21, 2024

Political Commentary

News Politics Business Sports

Threat of deposit exodus haunts Japan’s regional banks

2 min read

This month, Japanese digital lender Sony Bank began offering customers a yen deposit account with a taster annualised interest rate of 10.52 per cent — a startling return in a country where savings have earned almost nothing for nearly two decades.

For many of Japan’s 62 regional banks, such aggressive competition from online challengers threatens to spark an exodus of deposits at a time when higher benchmark interest rates overseas and the end of negative rates at home are fuelling concerns about the quality of their assets and the viability of their weakest borrowers.

An outflow of deposits would add to the challenges facing regional banks and Japan’s 264 shinkin co-operatives, already threatened by demographic change and the loss of population to Tokyo and other big cities.

At regional lender Shizuoka Financial Group’s earnings presentation in May, chief executive Hisashi Shibata said it was losing some retail deposits to digital banks and pledged to strengthen efforts to prevent outflows.

The same month Jimoto Holdings, which operates two regional banks in northeastern Japan, was in effect brought under state control after logging its biggest loss and failing to repay funds owed to the government.

Jimoto blamed its losses on hits to its overseas bond portfolio from rates that remain much higher in the US and Europe than a few years ago and on deterioration of its Japanese borrowers’ businesses.

“There could be more cases like Jimoto,” warned the chief executive of one regional bank. “While the financial system is stable at the moment, authorities do have a sense of crisis and if they see a risk, they will nip it in the bud.”

While investors, credit rating agencies and Japanese authorities have historically paid close attention to the potential fragility of regional banks’ assets, they have not needed to worry much about deposit flight. 

But Japan’s online banks have recorded accelerating growth in deposits and account openings. So far in…

2024-06-20 20:00:29

All news and articles are copyrighted to the respective authors and/or News Broadcasters. VIXC.Com is an independent Online News Aggregator

Read more from original source here…

Leave a Reply

Copyright © All rights reserved. | Newsphere by AF themes.