The government’s panel on privatization of the postal services is considering allowing Japan Post Bank to offer housing loans, according to sources.
Commercial banks and other private businesses are wary about the postal bank’s entry into the mortgage loan business and other financial services as borrowers and customers may view the lender as having “tacit” backing of the government, giving it an unfair advantage.
Japan Post Bank is a unit of Japan Post Holdings Co., which is owned entirely by the state.
The privatization panel may work out the proposal for allowing such loans with some conditions by the end of this month at the earliest for presentation to the Financial Services Agency and the Internal Affairs and Communications Ministry, the sources said.
The FSA is believed to be concerned about Japan Post Bank’s limited capability to assess borrowers’ default risks.
It may take some time before the government finally decides whether housing loans should be permitted for the bank, given strong reactions expected to the panel’s move as well as the possible change of government after next month’s election.
Housing loans are one of the four types of new businesses for which Japan Post Bank and Japan Post Insurance, another unit of the Japan Post group, are hoping to gain government approval.
The others are educational endowment insurance, property damage and casualty insurance for housing loan borrowers, and loans to businesses.
The panel is leaning toward allowing educational insurance policies on condition that Japan Post Insurance enhances insurance payment oversight. The unit has come under fire after it was discovered that it has not made full coverage payments on an estimated 100,000 policies.
The panel may come up with its final decision on the issue this week. Its decisions on housing loans and casualty insurance for borrowers are expected to be made at the same time.
The panel appears likely to endorse the lending business for corporate clients, possibly early next month, after imposing conditions such as expanding the capability to assess loan eligibility.
Banks eye foreign tieups
The Financial Services Agency is planning deregulation to enable small banks to tie up with foreign financial institutions in securing loans for corporate clients, primarily small firms looking to expand their operations overseas, according to sources.
Currently, Japanese banks can arrange loans for a corporate client from an overseas lender only if they own a majority stake of at least 50 percent in the foreign institution. This is also permissible if the foreign bank is the parent company of the domestic lender.
As a result, many small banks have seen key clients seeking to tap into overseas markets switch to major domestic lenders with foreign operations, and thus need to be able to access loans abroad more easily, the sources said Wednesday.
A working group of the Financial System Council, which advises the FSA, is currently examining the planned deregulation and after wrapping up discussions, possibly by the end of December, legislation to revise relevant laws will be introduced in an ordinary Diet session next year, the sources said.
The envisaged measures would enable smaller banks to maintain business ties with small corporate customers that begin operating abroad, since such companies would be able to access foreign-currency loans through the mediation of their domestic lenders, the sources said.
The draft plan would allow banks to serve as agents for a foreign lender in arranging loans for their domestic corporate customers.
Even if a bank does not have branches overseas, for instance, it would be authorized to act as an agent by dispatching employees on long-term assignments, according to the sources.
At present, only a limited number of regional banks have branches abroad.
Thanks to the deregulation, small regional lenders would be able to cash in on broker fees when arranging loans for corporate clients from foreign institutions.