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Deposit ceiling raise at Japan Post Bank giving rise to different responses in financial sector

  • 2015-07-21 15:00:00
  • , Asahi
  • Translation

(Asahi: July 18, 2015 – p. 6)

 

 Raising the deposit ceiling at Japan Post Bank is sparking opposition from the Japanese financial sector, but it does not stand united against this move. Though smaller financial institutions are voicing objections out of fear that they may lose clientele, major banks are looking to forge partnerships with the postal bank as they do not overlap in their services.

 

 The National Association of Shinkin Banks is at the forefront of opposition. “The regional financial system itself will collapse if Japan Post Bank is allowed to raise its deposit ceiling and we cannot allow it to happen,” said Kotaro Omae, head of the association. “Japan Post Bank enjoys substantial influence thanks to the credibility it derives from its association with the government,” said a senior official with a nationwide group of credit unions. “Once deposits flow out, we will not be able to stem that move.”

 

 Deposits are a main source of revenue for financial institutions, as they profit by lending out deposits. Deposits at credit unions are relatively small. They fear they may lose clients to Japan Post Bank.

 

 The Japanese Bankers’ Association, which is joined by major banks, is on the same wavelength. It objected to the plan that the Liberal Democratic Party endorsed at its General Affairs Council meeting on June 26 to raise the deposit ceiling at Japan Post Bank.

 

 But the raise “in principle does not affect us,” said an executive from a megabank. Japan Post Bank and major banks focus on different regions and clientele. “We don’t see Japan Post Bank as a threat as it has little knowhow on loan operations and asset management,” the person said.

 

 Partnerships are underway between major banks and Japan Post Bank. The Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp and Mizuho Bank oversee an initial public offering of Japan Post Group. Sumitomo Mitsui Trust Bank and Nomura Holdings are planning to set up an asset management firm with Japan Post Bank.

 

 Regional banks are also seeking ways to achieve a harmonious existence with Japan Post Bank. “We can jointly operate banks in less-populated areas where we are out of reach,” said Junji Ishii, chairman of Second Association of Regional Banks. “We can also consider co-financing a fund aimed at revitalizing regional economies.”

 

 Gov’t gauging opposition

 The government, meanwhile, remains cautions over the pros and cons of raising in Japan Post Bank’s deposit ceiling.

 

 The raise was proposed by the LDP and the Komeito Party. They want it put in place by the end of September, as Japan Post Bank and Japan Post Insurance are scheduled to go public this autumn and their corporate value needs to be enhanced by then.

 

 The LDP pledged to raise the deposit ceiling at Japan Post Bank during the general election held at the end of last year. It is pinning hopes on votes from postal related organizations when the Upper House holds elections next summer.

 

 The Ministry of Internal Affairs and Communications and the Financial Services Agency, which oversee the postal entities, are turning to a government committee on postal privatization for its opinion. The committee plans to announce its stance based on public opinions it is soliciting till August 4.

 

 The FSA wants to spread partnerships among Japan Post Group and financial institutes to small regional banks and credit unions. With local populations shrinking, it gets difficult to survive if money-losing outlets are kept intact. Outsourcing over-the-counter operations to about 24,000 postal offices nationwide may help make it easier to close such institutes.

 

 The government is gauging opposition to the deposit celling increase to find common ground. (Slightly abridged)

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