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[31 de Tokio, Reuters]- While the government is taking the lead in improving the environment for business integration and the merger of local banks, market participants who think banks have not found the benefits and cannot expect significant progress in the future . There are many. However, the environment surrounding the management of regional banks is already severe and, in the future, the responsibility to support companies that have been affected by the spread of the new corona virus will increase. The Financial Services Agency is calling for a decision on the way forward, even though there is some capacity available, and it appears to be a turning point for weak regional banks.
Starting with the statement by Prime Minister Yoshii Suga, who advocates for the revitalization of the local economy, that “there are too many regional banks”, the Japanese bank and the government have launched a series of support measures to promote business integration and merger of regional banks.
The Bank of Japan has introduced a system that grants a special interest rate of 0.1% to the Bank of Japan current account for regional financial institutions that have strengthened their management base or improved their Expense Ratio (OHR). The government has also enforced a special law that does not apply antitrust law and plans to establish a subsidy system next summer.
On the other hand, there is a temperature difference in how the market perceives it. A banking analyst notes that the reason business integration has not progressed so far is that the banks themselves did not feel the benefits of maintaining the status quo. “The situation has not changed significantly,” he said, saying that there will be no major progress in the reorganization movement starting next year. Regarding the Bank of Japan special interest rate, “most banks are considering the use of the OHR. The movement to reorganize in the wake of this is extremely limited,” he said.
Yusuke Yasuoka, an analyst at Mitsubishi UFJ Morgan Stanley Securities, believes there is still a long way to go before the reorganization with major regional banks. The major regional banks are also falling into low earnings and cannot afford it, “even if there is some support (with incentives), it is not in a position to move now.”
The reason the government thinks regional banks need to be reorganized is due to the deteriorating business environment surrounding regional banks. Looking back at the past, the debate on the reorganization of regional banks accelerated when financial crisis like the Lehman shock caused a drop in business performance, but there was no drastic reorganization at any time and more than 100 banks regional are still present. Existing.
However, at present, the management of regional banks is becoming more difficult due to low interest rates, population decline, the rise of Fintech, and the spread of the new corona infection. According to the summary of the Financial Services Agency, the net profit of the interim financial results of FY2020 announced by 103 regional banks decreased 11.5% compared to the same period of the previous year. The situation has changed significantly since the Lehman crash, when I was able to turn a profit.
In addition, from now on, the phase of supporting regional companies suffering from the crown disaster will shift from cash flow to business restructuring and revitalization. In the cash flow, there is a part backed by government loans practically interest-free and unsecured, but in the business restructuring and revitalization stage, the government’s support is lost and it is necessary for the regional banks themselves to take some risk and lend. Be.
An executive from the Financial Services Agency said: “The question is how powerful it is at the moment,” and said it would be difficult for a regional bank with a weak administrative base to support regional companies and contribute to the regional economy.
<"La gerencia debe pensar en el futuro">
In the future, the business environment for regional banks, which are based in areas where population decline is particularly severe, is expected to worsen further. Masamichi Adachi, chief economist at UBS Securities, predicts that if there is no reorganization leading to more efficient management after next year, some regional banks will be under government control within a few to 10 years. In the future, I think there is no way not to take advantage (incentives), mainly for regional banks whose profits are not expected to increase.
A senior executive at the Financial Services Agency said it is the current administration’s job to think five to 10 years from now about regional banks that are reluctant to reorganize, and point out that they must act forward. Strengthening the managerial base is essential for regional banks, which play a role in supporting local businesses and revitalizing the local economy, therefore, together with cost reduction and business model conversion, Business integration and merger are also options. ..
“We have to look ahead and take action while we still have some spare capacity,” he said.
Hiroki Nitta Edited by Shiho Tanaka
