FSA to step up surveillance of Japanese banks showing signs of stress

Among announced actions, the regulator mentioned on-site inspection and administrative punishment when banks post continuous deficit or their capital adequacy ratio drops below 4%. The decision came as the environment around regional banks has become increasingly severe, with regional banks required to establish a sustainable business model and secure financial health, Reuters cited from the authority’s report.

The FSA also said it would consider lowering the deposit insurance rate for financially robust banks in a move to drive consolidation among regional lenders. Now, all domestic financial institutions are required to reserve a deposit insurance fee of 0.033% to hedge against bankruptcy. With the change, Japan’s financial regulator would require different rates depending on a bank’s financial health, measured by factors such as the size of its core capital.