Japan · Nation Thailand
Japan plans bank capital relief for public-private funding
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Japan’s Financial Services Agency said on Monday (June 8) that it plans to conditionally relax capital adequacy requirements for banks, in a move designed to encourage them to invest in companies.
Key facts
- Under the proposal, banks would be allowed to hold less capital against certain investments made jointly with government-backed financial institutions.
- Japan’s current capital adequacy rules are in line with Basel III, the international financial regulatory framework introduced after the financial crisis that followed the 2008 collapse of US investment bank Lehman Brothers.
- The rules require internationally active banks to maintain capital-to-asset ratios of at least 8 per cent, while domestic banks must keep ratios of at least 4 per cent.
- The regulator regards such public-private investments as carrying lower risks than ordinary investments, meaning banks would not need to set aside the same level of capital as a buffer against possible losses.
Summary
Under the proposal, banks would be allowed to hold less capital against certain investments made jointly with government-backed financial institutions.
The regulator regards such public-private investments as carrying lower risks than ordinary investments, meaning banks would not need to set aside the same level of capital as a buffer against possible losses.