FSA to beef up regional bank surveillance

Jiji Press TOKYO (Jiji Press) — The Financial Services Agency will toughen its surveillance of regional bank management as the business environment remains severe for such lenders, Jiji Press learned Wednesday.

The FSA will estimate how financial conditions and earnings at regional banks, including second-tier lenders, would be affected if super-low interest rates, decreases in local populations and other negative factors continued.

If any regional banks are forecast to suffer serious deterioration, the agency will ask them what measures they would take to improve their business operations, informed sources said.

If enough measures are not presented, the FSA will issue business improvement and other orders under the banking law, the sources added.

The FSA will make public a draft revision to its bank supervisory guidelines including the tougher policy toward regional banks as early as this month.

Under the revised guidelines, expected to take effect in summer, regional banks may be urged to replace their top leaders or even carry out business integration with other banks.

In 2002, the FSA introduced an early warning system for making struggling banks take action swiftly to improve their business.

The agency can issue business improvement orders under the system. But the main purpose would be recovery of financial health as measured by capital adequacy ratios and other indicators.Speech

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