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Japan regulator to step up surveillance of stressed banks


JAPAN'S financial regulator said it would beef up surveillance of local banks that show signs of stress as years of ultra-low rates and a shrinking population erode their profitability.

The Financial Services Agency (FSA) will take preventive steps such as on-site inspection and administrative punishment when banks post continuous deficit or their capital adequacy ratio drops below 4 per cent, the regulator's annual report shows.

"The environment around regional banks has become increasingly severe," the report said on Wednesday. "Regional banks need to establish a sustainable business model and secure financial health."

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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. All domestic financial institutions are currently required to reserve a deposit insurance fee of 0.033 per cent to hedge against bankruptcy. With the change, the FSA would require different rates depending on a bank's financial health, measured by factors such as the size of its core capital. REUTERS