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Risk of digital bank run small in Japan - Morita
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Japan's financial system 'extremely stable' - Morita
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Lenders must re-assess dollar portfolios, low-liquidity
assets
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Existence of safety nets make it different from Lehman
shock
By Takahiko Wada and Leika Kihara
TOKYO, March 27 (Reuters) - Japanese banks should
scrutinise their foreign currency-denominated portfolios and
holdings of low-liquidity assets in the wake of the recent
global market rout, Tokio Morita, former executive of the
country's banking regulator said on Monday.
Worries of systemic bank stress have jolted global financial
markets, as the collapse of two U.S. lenders and a Swiss
government-orchestrated takeover of troubled Credit Suisse earlier this month shook investor confidence over the
broader banking sector.
Japan's generous deposit guarantee system and the small
ratio of online to traditional banking accounts meant domestic
lenders are unlikely to face the kind of rapid deposit
withdrawals that took down Silicon Valley Bank, said Morita,
former vice minister for international affairs at the Financial
Services Agency (FSA).
"Japan's financial system is extremely stable and yen
liquidity is abundant," so the risk of domestic banks suffering
a contagion was small, he told Reuters in an interview.
But Morita warned against complacency, saying that domestic
banks must safeguard against potential spill-overs such as by
re-assessing their portfolios.
"Mega banks must re-assess their dollar- and other foreign
currency-denominated liquidity positions," and ensure they are
well-equipped to weather any spike in overseas funding costs, he
said.
The lenders must also scrutinise risks associated with their
holdings of low-liquidity assets in case global market trade for
such instruments dry up, he said.
Well-versed in global financial regulation, Morita took part
in policymakers' efforts to contain the fallout from the
collapse of Lehman Brothers in 2008.
Morita said he did not expect many other banks to follow the
demise of Silicon Valley Bank and Credit Suisse, whose
troubles were due mostly to their unique or high-risk business
models.
"This time, policymakers also have various safety nets in
place," he said. "It's quite different from the time Lehman
collapsed."
(Reporting by Takahiko Wada and Leika Kihara; Editing by
Jacqueline Wong)
