Japan mega banks must help regional peers lend abroad: new banking head

Mon Mar 31, 2014 11:07am EDT
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By Taiga Uranaka and Taro Fuse

TOKYO (Reuters) - Japan's biggest banks must do more to involve smaller peers when seeking partners to finance overseas projects, to support a regional banking sector facing an uncertain future without a wider pool of borrowers, Japan's new banking head said.

Many of Japan's more than 100 local banks have long been stuffed with deposits but starved of loan customers caused by two decades of economic stagnation - a state the government, in office since December 2012, has promised to end.

Fearing loan profit being squeezed to an unsustainable degree, the banking regulator has urged small banks to merge or broaden their lending scope through, for instance, participating in overseas project finance with the help of majors such as Mitsubishi UFJ Financial Group Inc (MUFG) (8306.T: Quote).

Some regional lenders are eager to take part in financing overseas energy or infrastructure projects, say bankers at major lenders, but lack expertise as well as access to foreign currency. The regulator wants majors to bridge the gap - as does the new banking head, who is also president of MUFG.

"It is desirable for Japanese financial institutions with ample funds to participate in these projects," said Nobuyuki Hirano, who became chairman of the Japanese Bankers Association on April 1.

Infrastructure development in Asia alone needs $8 trillion in financing this decade. Regional banks have the funds, so inviting them to join syndicates is "worth the effort," Hirano told Reuters in an interview.

Japan's biggest regional bank by assets is Fukuoka Financial Group Inc (8354.T: Quote), based on the southwest island of Kyushu, followed by Bank of Yokohama Ltd 8332.T, Chiba Bank Ltd (8331.T: Quote) and Hokuhoku Financial Group Inc (8377.T: Quote), showed data from Thomson Reuters.

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Nobuyuki Hirano speaks during news conference at the Bank of Japan in Tokyo January 30, 2012. REUTERS/Toru Hanai