The Bank of Japan said Friday it will expand its special program aimed at supporting regional bank mergers to cover smaller community-based lenders in a bid to prompt reorganizations of struggling local financial institutions.
The BOJ said last month it will provide an additional 0.1% interest on the balance of current account deposits held by regional banks and community-focused shinkin banks at the central bank if they decide to merge with others or integrate their businesses.
On Friday, the BOJ announced it will expand the target of the three-year program through fiscal 2022 to smaller community-based credit unions as well as agricultural and fishery cooperatives offering financial services.
The BOJ's move has been in line with Prime Minister Yoshihide Suga's call for reorganizing regional banks. Before taking office in September, Suga said there are too many regional lenders in a rapidly aging Japan.
The central bank calculates it would pay up to ¥70 billion ($676 million) a year if all of about 1,200 regional and community-based lenders apply for the planned program slated to be introduced in March.
The BOJ has said it will also provide the special interest of 0.1% in the three-year period if regional lenders improve their financial health to some extent based on the overhead ratio — the ratio of overhead costs to gross operating profits — compared with that in fiscal 2019 through March this year.