Japan bank lobby chief sees no signs of contagion from Credit Suisse woes

By Makiko Yamazaki

TOKYO (Reuters) – The head of Japan‘s banking lobby said on Thursday that there are no signs at the moment of the Japanese financial system being affected by a crisis of confidence in Credit Suisse, as the country’s banks are well-capitalised.

A plunge in shares of Credit Suisse has renewed fears of a full-blown banking crisis, causing a rout in global bank shares. Credit Suisse later announced it would borrow up to 50 billion Swiss francs ($54 billion) from the Swiss central bank.

“Global banks have beefed up their risk controls over capital and liquidity” since the 2008 global financial crisis, Junichi Hanzawa, chairman of the Japanese Bankers Association, told reporters.

“European banks generally have solid capital ratios, and so do Japanese banks,” said Hanzawa, also the chief executive of MUFG Bank.

He also said systemic risks from the collapse of U.S.-based Silicon Valley Bank have been reduced since the Federal Reserves decision to backstop all depositors.

Losses in Silicon Valley Bank‘s bond portfolio have highlighted similar risks for Japanese lenders’ gigantic foreign bond holdings and their relatively low loan-to-deposit ratios.

Hanzawa assured of the health of the Japanese banking sector, saying that major banks have hedged their positions in foreign bonds and regional banks have already sold substantial amounts of them.

But he warned that the Silicon Valley Bank case showed that a bank run and a subsequent collapse can happen in a matter of a few days even when risk management at banks has been improved.

He also said the environment surrounding the financial market is changing drastically due to inflation, interest rate movements and geopolitical risks.

“We need to closely monitor economic and market situations including credit costs at individual banks,” he said.

(Reporting by Makiko Yamazaki; Editing by Edmund Klamann and Tomasz Janowski)