Japan’s financial regulator plans a sweeping crackdown on ¥10 trillion ($67 billion) of high-yield loans backed by government bonds and other assets that have gained popularity among regional banks even after officials warned about their risks.
The Financial Services Agency will scrutinize banks that have increased purchases of Japanese government bonds that are repackaged into loans over the past year, said Toshinori Yashiki, director-general of the agency’s strategy development and management bureau. Brokerages that are actively pitching these products to lenders will also be in the regulator’s crosshairs, he said in an interview on Thursday.
The FSA is stepping up enforcement after it noticed some regional banks are buying more of these products despite the regulator’s warning in January 2024. Officials are also concerned that some lenders lack proper risk management for the opaque products and could suffer mounting losses if market rates move against them.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.