(Adds quotes from BOJ official on Silicon Valley Bank impact)
By Leika Kihara
TOKYO, March 14 (Reuters) - Japanese financial
institutions have sufficient capital buffers to absorb losses
caused by various external factors, including risks caused by
the collapse of U.S. lender Silicon Valley Bank, the Bank of
Japan (BOJ) said on Tuesday.
They have continued to channel funds to borrowers smoothly
even under various stress factors such as supply constraints and
rising overseas interest rates, the BOJ said in an annual report
that detailed the results of on-site examinations of financial
institutions.
"Japanese financial institutions' direct exposure to Silicon
Valley Bank is small, and thus the impact is likely limited," a
BOJ official told reporters in a briefing on the report.
The collapses of Silicon Valley Bank and Signature
Bank have stoked concern about contagion, sending
shares of financial stocks - including those in Japan -
tumbling.
In its report, the BOJ said many Japanese regional banks
face challenges in risk management such as analysing impacts on
their portfolios in times of heightened market volatility.
"Some regional financial institutions have suffered a
substantial increase in valuation losses" and failed to
adequately assess their risk tolerance against profits, it said.
It noted that Japanese financial institutions have
actively taken on market risk in recent years amid ultra-low
interest rates, though they have become "somewhat cautious" on
their investments in light of rising global interest rates.
Some regional financial institutions have also not
sufficiently ascertained how declining interest payments could
affect their future earnings, the BOJ said.
"Thus, many regional financial institutions were found to
have issues in terms of conducting effective risk management,"
the report said.
(Reporting by Leika Kihara; Editing by Shri Navaratnam and
Edwina Gibbs)
Messaging: leika.kihara.reuters.com@reuters.net))
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