How to deal with urgent issues such as the improvement of business environments for regional banks is called into question.
The Financial Services Agency's new leadership structure has been inaugurated. Nobuchika Mori, who served as the agency's commissioner for three years, has been replaced by Toshihide Endo, who was the director general of the agency's Supervision Bureau.
While in office, Mori focused on switching the priority of financial administration from inspecting and punishing banks to developing them.
Mori abolished the inspection bureau in charge of inspecting financial institutions and integrated it into the Supervision Bureau and other bureaus. The financial inspection manual for monitoring loan portfolios held by banks will be abolished by the end of the current fiscal year.
The organizational reform is aimed at revising the old uniform inspection method and thus grasping business challenges from a multilateral perspective. The conventional inspection contributed to accelerating the disposal of nonperforming loans and stabilizing the financial system but was criticized by many as having restrained management too excessively.
The FSA's stance of reexamining the inspection and supervision system to attach importance to dialogue with financial institutions is understandable.
But much work remains to be done. The biggest cause of concern is that the earning capacity of regional banks has declined due to a protracted period of ultra-low interest rates.
According to an FSA survey, 54 of 106 regional banks -- more than half -- suffered deficits in their core operations in the business term that ended in March this year. Of the 54 such banks, 40 had posted deficits for three consecutive business terms or more.
Forward-looking measures key
Regional banks' revenue sources are limited as their sphere of business is smaller than that of major banks. As long as there is no prospect of interest rates being raised for the time being, bolstering management foundations and enhancing business efficiency through the realignment of regional banks could be leading options.
The FSA is at odds with the Fair Trade Commission, which has not permitted the integration of regional banks in the Kyushu region. It is necessary for the government as a whole to share a crisis awareness and expedite discussions to work toward making arrangements for the realignment of regional banks.
It is also important to make customer-oriented business management, which was promoted by Mori, take root. Scandals involving banks have not ceased cannot be overlooked.
The FSA has issued Higashi-Nippon Bank Ltd. a business improvement order, a step taken after it was found that the bank had been involved in many inappropriate loan practices, including receiving unnecessary commissions from its borrowers. Shizuoka-based Suruga Bank Ltd.'s rampant practice of providing problematic loans has also been revealed.
Trying to expand earnings is important, but disregarding customers while putting too much emphasis on corporate profits cannot be allowed. The FSA needs to watch out closely for such practices.
The financial industry has come under pressure to carry out reforms due to such factors as the spread of fintech, or financial services that use information technology. Measures that anticipate changing times are called for in financial administration.
The FSA got a head start to introduce a registration system for cryptocurrency exchange operators. Sloppy management by some operators was revealed thereafter. It is essential to keep a close watch for such risks.
(From The Yomiuri Shimbun, July 20, 2018)
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