Japan¡¯s financial regulator is urging regional banks to help local businesses secure equity funding necessary for further growth, as part of the country¡¯s broader drive to revitalize rural economies.
¡°Some banks are already doing it, but I hope others will try,¡± Hiroshi Okada, a senior official at the Financial Services Agency (FSA), said in an interview. In addition to providing loans, local lenders need to advise their corporate clients on the best mix of debt and equity to fund their expansion, he said.
Prime Minister Shigeru Ishiba is trying to revive Japan¡¯s local economies, which are struggling to grow as the population ages and shrinks. Okada, a career civil servant, is heading the FSA¡¯s efforts to draw up a package of policy measures to expand regional banks¡¯ roles in supporting economies hit by the adverse demographic shifts.
Okada is calling on regional banks to introduce private equity funds and investment banks to their corporate clients. Lenders should also be able to facilitate mergers and acquisitions by local businesses, many of which face succession issues for elderly owners, he said.
Regional banks are the main creditors for most small and medium-size businesses outside major population centers. Unlike Tokyo-based megabanks, including Mitsubishi UFJ Financial Group, many of them don¡¯t have full-scale investment banking and asset management operations, though they are trying to expand beyond traditional commercial banking.
To make sure regional lenders stay healthy enough to fulfill their revitalization role, the FSA has said its policy package will also have items designed to beef up their financial soundness, such as an extension of a subsidy program for bank consolidations.
The FSA has long been pressuring regional banks to come to grips with the tough outlook for their businesses. There are about 70 listed regional banks and holding companies that own multiple lenders.
¡°We have been sounding alarm bells for the long-term viability of local financial institutions for the past 10 years,¡± Okada said. ¡°There has been certain progress, but it¡¯s not enough.¡±
While stressing consolidation isn¡¯t necessarily the answer, he said the agency ¡°will support with subsidies and other measures if banks make such a choice.¡±
Okada also said long-term viability is a more pressing issue for the country¡¯s roughly 400 local credit unions.
¡°Before the population decline and other conditions get tougher, we will do everything we can,¡± he said.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.