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Japanese regulator scrutinises bank vulnerabilities to rising rates



Japan’s Financial Services Agency (FSA) is preparing to assess banks’ resilience against potential risks arising from expected interest rate hikes by the Bank of Japan (BOJ). This scrutiny, led by Deputy Director-General Toshinori Yashiki, will focus on banks’ exposure to highly-leveraged borrowers and real estate sectors. With the BOJ poised for its first rate increase since 2007, there’s concern over borrowers’ ability to handle higher interest payments. Yashiki highlighted the increased risks in leveraged buyouts and non-recourse property lending, citing past issues with significant credit costs. The FSA’s approach includes encouraging responsible lending practices and preparing for new challenges like social media’s impact on banking. Yashiki emphasises the importance of banks maintaining strict lending discipline and enhancing their internal audits to ensure stability in this changing financial landscape.

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