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Japan delays introduction of Basel III capital rules for megabanks

  • March 15, 2022
  • , Nikkei Asia , 6:00 p.m.
  • English Press

TOKYO — Japan’s financial regulator will introduce new capital requirements for large banks, known as Basel III, two years later than originally planned, Nikkei has learned.

 

Originally scheduled to go into effect in the fiscal year ending March 2022, the new requirements will not be introduced until the fiscal year ending March 2024. The Financial Services Agency had already postponed implementation of the new regulations by a year to ensure that they would not hinder the government’s fiscal support during the COVID-19 outbreak. But the pandemic has dragged on, and Russia’s invasion of Ukraine has caused more turmoil in financial markets. The financial regulator decided to further delay implementation of the regulations so that banks can focus on supporting their clients.

 

Japan is following the footsteps of the European Union, which is also delaying the rollout of the regulations. Basel III refers to a set of international capital adequacy requirements for banks that was established in response to the global financial crisis in 2008. The rules aim to raise banks’ quantity and quality of capital, enabling them to absorb greater losses by requiring them to accumulate more capital and to strictly assess the risk of losses associated with their investments and lending.

 

In September 2021, the FSA announced that major Japanese banks operating overseas, such as the top three megabanks — Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group — would be subject to the new rules in the fiscal year ending March 2023. Smaller regional banks, shinkin banks and credit unions would follow suit in the fiscal year ending March 2024.

 

With the pandemic in mind, the FSA postponed the introduction of Basel III for regional financial institutions to the fiscal year ending March 2025 and had been considering whether to push back the timeline for the megabanks as well.

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