BOJ unveils scheme incentivising regional bank consolidation

[TOKYO] The Bank of Japan (BOJ) on Tuesday unveiled a scheme aimed at incentivising regional lenders to consolidate and help revitalise regional economies, a move which echoes growing concern over the health of the country's banking system.

The central bank said it will introduce a special deposit facility under which it will pay 0.1 per cent interest on current account balances held by regional lenders that meet certain criteria.

Under the scheme, regional lenders that opt for mergers or business integration will be remunerated for three years, the BOJ said in a statement.

"The business environment surrounding regional financial institutions is becoming more severe due to the impact from the coronavirus pandemic, structural factors like dwindling population and continued low interest rates," the central bank said.

"The BOJ decided to create a system that assists financial institutions in making efforts to underpin their regional economies," it said.

REUTERS