Blog: Japan’s ex-bank regulator urges lenders to scrutinise portfolios amid market rout – Yahoo Finance


Risk of digital bank run small in Japan – Morita


Japan’s financial system ‘extremely stable’ – Morita


Lenders must re-assess dollar portfolios, low-liquidity assets


Existence of safety nets make it different from Lehman shock

By Takahiko Wada and Leika Kihara

TOKYO, March 27 (Reuters) – Japanese banks should scrutinise their foreign currency-denominated portfolios and holdings of low-liquidity assets in the wake of the recent global market rout, Tokio Morita, former executive of the country’s banking regulator said on Monday.

Worries of systemic bank stress have jolted global financial markets, as the collapse of two U.S. lenders and a Swiss government-orchestrated takeover of troubled Credit Suisse earlier this month shook investor confidence over the broader banking sector.

Japan’s generous deposit guarantee system and the small ratio of online to traditional banking accounts meant domestic lenders are unlikely to face the kind of rapid deposit withdrawals that took down Silicon Valley Bank, said Morita, former vice minister for international affairs at the Financial Services Agency (FSA).

“Japan’s financial system is extremely stable and yen liquidity is abundant,” so the risk of domestic banks suffering a contagion was small, he told Reuters in an interview.

But Morita warned against complacency, saying that domestic banks must safeguard against potential spill-overs such as by re-assessing their portfolios.

“Mega banks must re-assess their dollar- and other foreign currency-denominated liquidity positions,” and ensure they are well-equipped to weather any spike in overseas funding costs, he said.

The lenders must also scrutinise risks associated with their holdings of low-liquidity assets in case global market trade for such instruments dry up, he said.

Well-versed in global financial regulation, Morita took part in policymakers’ efforts to contain the fallout from the collapse of Lehman Brothers in 2008.

Morita said he did not expect many other banks to follow the demise of Silicon Valley Bank and Credit Suisse, whose troubles were due mostly to their unique or high-risk business models.

“This time, policymakers also have various safety nets in place,” he said. “It’s quite different from the time Lehman collapsed.” (Reporting by Takahiko Wada and Leika Kihara; Editing by Jacqueline Wong)

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s