Japan¡¯s main banking lobby plans to establish risk management guidelines for lenders offering leveraged loans for finance mergers and acquisitions deals as transactions soar in the country, according to people familiar with the matter.

The guidance will be released by the Japanese Bankers Association this month as part of a report on funding leveraged buyout deals, said the people, who asked not to be identified as the discussions are confidential. Such guidelines aren¡¯t binding but are in practice followed by members of the powerful association.

The report may also discuss the need to consider standardizing contracts, and making available lists of market terms and their definitions, part of Japan¡¯s efforts to set some standards for financial firms entering the nation¡¯s leveraged buyout (LBO) market, according to the people.

The association is expressing concern about the recent rise in interest rates as well, which will increase the importance of monitoring companies¡¯ ability to repay debt and changes in cash flow, they said.

A Japanese Bankers Association spokesperson declined to comment.

Financial companies in Japan are facing pressure to lend more for M&A deals, which have been on the rise as policymakers push companies to boost their share valuations and secure successors to lead businesses. While loans for leveraged M&A buyouts have climbed, market participants say there¡¯s still strong demand for such financing, which uses the assets of takeover target companies as collateral for loans.

Japan¡¯s biggest banks such as Mitsubishi UFJ Financial Group have historically been the largest lenders of such debt, but data shows smaller regional banks have become more active in the market as a shrinking population weighs on their traditional lending operations.

Big Japanese banks¡¯ outstanding leveraged loans totaled about ?6.9 trillion ($44 billion) and those for regional lenders came to around ?1.9 trillion at the end of September last year, according to Japanese Bankers Association data. That marked an increase from some ?6.6 trillion and ?1.4 trillion respectively two years earlier in data from the Financial Services Agency.

The banking lobby plans to continue to compile the LBO data semiannually, but it still sees issues with the figures including their accuracy and will work on revising them, the people said.

With M&A involving Japanese companies increasing both in terms of the number of deals and monetary amount, companies may find it hard to raise funds when needed for leveraged buyouts. Only 63% of Japanese banks handle LBO financing, the banking data shows. The U.S. and Europe have well-developed secondary markets for LBO debt, something that¡¯s lacking in Japan that could make transactions more active.