Japan regulatory head scolds weak regional banks: ‘Don’t blame BOJ’

Japan’s roughly 100 regional banks are grappling with diminishing returns from their traditional lending business. (AFP)
Updated 22 August 2018
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Japan regulatory head scolds weak regional banks: ‘Don’t blame BOJ’

  • A shrinking population outside Japan’s biggest cities is hurting business
  • Regional banks’ combined core profits totaled ¥1.2 trillion ($10.9 billion) in the year ended in March, data compiled by FSA shows

TOKYO: Japan’s top financial regulator said regional banks “should not blame the Bank of Japan” for their woes, urging them to explore ways to survive ultra-low interest rates.
“They should not just sit and wait for the BOJ to change its policy. Will everything be alright if it seeks exit and normalizes interest rates? I don’t think so,” Toshihide Endo, commissioner of the Financial Services Agency (FSA), told Reuters in an interview on Wednesday.
The comments come as many of Japan’s roughly 100 regional banks grapple with diminishing returns from their traditional lending business, hit by a low interest rate environment amid the BOJ’s ultra-loose monetary policy.
A shrinking population outside Japan’s biggest cities is also hurting business.
Regional banks’ combined core profits totaled ¥1.2 trillion ($10.9 billion) in the year ended in March, data compiled by FSA shows, down 30 percent from five years earlier, just before the central bank launched aggressive monetary easing.
Endo, who became FSA chief in July, said managements at some regional banks needed to get their act together, warning that they were “not considering seriously” how to build a sustainable business model despite the industry’s gloomy prospects.
“We have been telling them to consider action and make judgments on their own, not just because we tell them to do so,” he said.
Endo said FSA is not urging consolidation among regional banks, emphasizing it is up to the management of each lender to decide on options to survive.
At the same time, Endo said there have been some mergers that made him doubt managements’ seriousness. “Some rival banks got together under a holding company just for the sake of a non-aggression pact. I don’t see the point of it,” he said.
Endo, 59, joined the finance ministry in 1982. From 2015 until last month, he oversaw the country’s financial firms at the FSA’s supervisory bureau. Before that, he ran its inspection bureau.
On cryptocurrency exchanges, he said the FSA was trying to strike a balance between protecting consumers and promoting technological innovation.
Japan last year became the first country to regulate cryptocurrency exchanges, as it tries to encourage technological innovation while ensuring consumer protection.
The FSA took a tougher stance toward the industry after the $530 million theft of digital money from Tokyo-based Coincheck Inc. in January.
FSA inspections found sloppy management at many of the exchanges, saying they lacked basic internal controls to protect users and prevent money laundering. As a result, some exchanges were ordered to temporarily suspend operations.
“We have no intention to curb (the crypto industry) excessively,” he said. “We would like to see it grow under appropriate regulation.”


Abu Dhabi aims to lure start-ups with investment in new technology hub

Updated 24 March 2019
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Abu Dhabi aims to lure start-ups with investment in new technology hub

  • The initiative will help Abu Dhabi reduce reliance on oil
  • Mubadala hopes to attract Chinese and Indian companies

ABU DHABI: Abu Dhabi will commit up to $272 million to support technology start-ups, it said on Sunday, in a dedicated hub as part of efforts to diversify its economy.

US tech giant Microsoft will be a strategic partner, providing technology and cloud services to the businesses that join the hub as the capital of the United Arab Emirates continues its push to reduce reliance on oil revenue.
Abu Dhabi derives about 50 percent of its real gross domestic product and about 90 percent of central government revenue from the hydrocarbon sector, according to ratings agency S&P.
The emirate launched a $13.6 billion stimulus fund, Ghadan 21, in September last year to accelerate economic growth. Ghadan means tomorrow in Arabic. The new initiative, named Hub 71, is linked to Ghadan will also involve the launch of a $136 million fund to invest in start-ups, said Ibrahim Ajami, head of Mubadala Ventures, the technology arm of Mubadala Investment Co.
The goal is to have 100 companies over the next three to five years, Ajami said. “The market opportunities in this region are immense,” he added.
Mubadala, with assets of $225 billion and a big investor in tech companies, will act as the driver of the hub, located in the emirate’s financial district.
Softbank will be active in the hub and support the expansion of companies in which it has invested, Ajami said, adding that Mubadala is also aiming to attract Chinese and Indian companies, among others.
Mubadala which has committed $15 billion to the Softbank Vision Fund, plans to launch a $400 million fund to invest in leading European technology companies.
Incentives mapped out by the government include housing, office space and health insurance as part of the $272 million commitment, Ajami said.
Abu Dhabi will also announce a new research and development initiative on Monday linked to the Ghadan 21 plan, according to an invitation sent to journalists.