An increasing number of banks are charging fees for issuing paper bankbooks and on accounts that have not been used for a certain period of time.
The business environment for banks is becoming more severe due to prolonged low interest rates. Furthermore, the costs of managing bank accounts and paper bankbooks have increasingly been weighing on banks' operations.
Banks used to compete for deposits when interest rates were higher. But now that their customer services have changed after, for example, they began offering online banking. Many banks are rethinking where their margins can come from.
In April, Nagano City-based Hachijuni Bank Ltd. introduced an annual fee of 550, yen including tax, on all accounts that have been inactive in excess of two years. The fee is to be applied on accounts that were opened on and after April 1, with a balance of less than 10,000 yen. Accounts opened before April 1 with a balance of less than 1,000 yen are also subject to the fee.
According to the bank, it is the first in the country to charge a fee on existing accounts that are without transactions and are dormant.
Under the Civil Code, making disadvantageous changes to a customer's back contract was difficult. However, a revision to the code in April last year allowed banks to change existing contracts as long as such changes are reasonable.
Hachijuni Bank explained that the introduction of the fee is aimed mainly at "reducing dormant accounts that are at high risk of being misused for money laundering and other purposes." The bank said it is also effective in reducing costs.
Since last year, three megabanks and regional banks started implementing a fee to issue paper bankbooks as well as charging those who open new accounts but don't use them for a certain period of time. Behind the move is the Bank of Japan's prolonged negative interest rate policy, which has resulted in profit margins from lending decreasing.
More than 40% of the listed regional banks and banking groups nationwide reported lower profits or losses for the fiscal year that ended March 31. The net profits of the three megabanks fell by about 30% over the past seven years.
When interest rates were high in the bubble economy period, banks battled with each other in efforts to garner customer deposits and bank accounts rocketed in number as a result. During the era, some branches promoted fixed-term deposits with some gifts attached and imposed strict sales quotas on their sales staff.
Loans were in high demand at the time and companies were very willing to even sign loans with high interest rates. The more deposits the banks collected, the higher the profit margins they could enjoy.
But in the current era of low interest rates, the cost of maintaining accounts has begun to weigh on banks.
Managing dormant accounts places a heavy burden on banks in particular, as they need to ensure that they are not being used for criminal purposes. Issuing paper bankbooks also obliges banks to pay an annual stamp tax of 200 yen per book, in addition to printing and other costs.
For this reason, Aozora Bank Ltd. stopped issuing paper bankbooks to new customers in February. Banks are now promoting the use of online accounts instead, which additionally assists with the streamlining of branch operations.
Toyoki Sameshima, a senior analyst at SBI Securities Co., said, "Efforts to collect fees from new customers will expand from now on as banks cannot earn money with low interest rates."
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