By Takaya Yamaguchi and Tetsushi Kajimoto
TOKYO, April 27 (Reuters) - Financial authorities must
be mindful of the risk of excessive regulation aimed at
preventing digital bank runs caused by online rumours and
speculation, said the former commissioner of Japan's Financial
Services Agency (FSA).
The failure of Silicon Valley Bank and Signature Bank in the
United States revealed the speed and size of withdrawals during
such runs, but heavy-handed responses must be avoided to prevent
stifling the industry, Shinsei Bank Chairman Hirofumi Gomi said.
"If you try to contain withdrawals through additional
regulation, that will only open the door for other loopholes in
markets," Gomi told Reuters in an interview on Wednesday. "It
would put major restrictions on bank functions such as
loan-deposit activity."
Gomi became a career bureaucrat after joining the Ministry
of Finance in 1972. He spent the late 1990s and early 2000s as a
senior FSA official dealing with bank and brokerage failures
during the post-bubble financial crisis, before becoming
commissioner from 2004 to 2007.
Speculation is rife that the Bank of Japan may tweak or even
ditch its yield control policy under new Governor Kazuo Ueda,
who chairs his first policy-setting meeting on April 27-28.
Gomi said interest rate hikes would be welcomed by banks
which have struggled to lift profit due to side effects of
prolonged ultra-loose monetary policy under Ueda's predecessor
Haruhiko Kuroda.
"Continuing low interest rates won't push up economic growth
potential," Gomi said. "Gradual increases in interest rates will
lay the groundwork for banks to raise profit."
"Hasty tightening could have a greater (negative) impact on
the real economy though, which would affect banks' lending
attitude and widen unrealised loss from bonds."
(Reporting by Tetsushi Kajimoto and Takaya Yamaguchi; Editing
by Christopher Cushing)
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