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

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.”


Saudi Aramco shares soar at maximum 10% on market debut

Updated 11 December 2019

Saudi Aramco shares soar at maximum 10% on market debut

  • Company is now world’s largest publicly traded company, bigger than Apple

RIYADH: Saudi Aramco shares opened at 35.2 riyals ($9.39) on Wednesday at the Kingdom’s stock exchange, 10 percent above their IPO price of 32 riyals, in their first day of trading following a record $26.5 billion initial public offering.
Aramco has earlier priced its IPO at 32 riyals ($8.53) per share, the high end of the target range, surpassing the $25 billion raised by Chinese retail giant Alibaba in its 2014 Wall Street debut.
Aramco’s earlier indicative debut price was seen at 35.2 riyals, 10 per cent above IPO price, raising the company’s valuation to $1.88 trillion, Refintiv data showed.
At that price, Aramco is world’s most valuable listed company. That’s more than the top five oil companies – Exxon Mobil, Total, Royal Dutch Shell, Chevron and BP – combined.
“Today Aramco will become the largest listed company in the world and (Tadawul) among the top ten global financial markets,” Sarah Al-Suhaimi, chairwoman of the Saudi Arabian stock exchange, said during a ceremony marking the oil giant’s first day of trading.
“Aramco today is the largest integrated oil and gas company in the world. Before Saudi Arabia was the only shareholder of the company, now there are 5 million shareholders including citizens, residents and investors,” said Yasir Al-Rumayyan, the managing director and chief executive of the Saudi Public Investment Fund.
“Aramco’s IPO will enhance the company’s governance and strengthen its standards.”
Amin Nasser, the president and CEO of Saudi Aramco, meanwhile thanked the new shareholders for their confidence and trust of the oil company.
The sale of 1.5 percent of the firm, or three billion shares, is the bedrock of Crown Prince Mohammed bin Salman’s ambitious strategy to overhaul the oil-reliant economy.
Riyadh’s Tadawul stock exchange earlier said it will hold an opening auction for Aramco shares for an hour from 9:30 a.m. followed by continuous trading, with price changes limited to plus or minus 10 percent.

The company said Friday it could exercise a “greenshoe” option, selling additional shares to bring the total raised up to $29.4 billion.
The market launch puts the oil behemoth’s value at $1.7 trillion, far ahead of other firms in the trillion-dollar club, including Apple and Microsoft.
Two-thirds of the shares were offered to institutional investors. Saudi government bodies accounted for 13.2 percent of the institutional tranche, investing around $2.3 billion, according to lead IPO manager Samba Capital.
The IPO is a crucial part of Prince Mohammed’s plan to wean the economy away from oil by pumping funds into megaprojects and non-energy industries such as tourism and entertainment.
Watch the video marking Aramco’s opening trading: