Norinchukin Bank and the National Federation of Fisheries Cooperative Associations have agreed to adopt voluntary rules intended to prevent the collapse of fisheries financial institutions by imposing capital-adequacy requirements that are tougher than those applicable to domestic banks, sources close to the case said Thursday.
The new rules, effective April 1, will authorize Norinchukin, the central bank for the agricultural and fisheries sectors, to instruct financial units of fisheries cooperatives to improve operations if their capital-adequacy ratios fall below 10 percent.
The instructions will include demands that operational restructuring plans and restrictions on fund management be compiled. They will be issued to the prefectural credit federations of fisheries co-ops, which supervise individual co-ops' financial units, when their capital-adequacy ratios drop below 8 percent.
The ratio is a measure of the amount of a bank's capital expressed as a percentage of its risk-weighted credit exposures.
Internationally active banks are required to hold capital equal to 8 percent of all risk-weighted assets. Banks engaging in domestic operations are required to hold a ratio of 4 percent.
Under the voluntary rules, ailing institutions whose rehabilitation is deemed possible will get support from the fisheries industry's mutual-aid fund.
But if their capital-adequacy ratio is lower than 4 percent, Norinchukin will urge them to withdraw from credit services or transfer operations to prefectural federations.
The new rules are in reaction to the government's introduction of a refund cap of up to 10 million yen on time deposits April 1, ending its blanket deposit guarantee in case of bank failure.
For farm-related financial institutions, Norinchukin introduced voluntary rules with an 8 percent capital-adequacy requirement in January.