/

Financial Services Agency investigating effects on banks of negative interest rates by Bank of Japan

Kyodo

The Financial Services Agency has launched a survey to grasp the effects of the Bank of Japan’s decision two weeks ago to adopt a negative interest rate on financial institutions, mainly major banks and regional banks, sources close to the matter said Friday.

The financial watchdog will check such banks’ operations and revenues to see whether they shift an excessive burden onto depositors by raising charges on financial services or through other means.

The survey comes at a time when concern is growing that the BOJ’s policy decision could narrow the profit margin of banks by lowering bond yields and pressure their business.

The central bank decided on Jan. 29 to introduce a negative interest rate next Tuesday, leading to a sharp fall in government bond yields, with the rate on the benchmark 10-year government bond turning negative for the first time ever this past week.

Lower yields could narrow the gap between rates on loans and deposits and cut banks’ profit margin.

Since the banking system has not been built on the assumption of the eventual introduction of a negative interest rate, it could become impossible to calculate the market value of some of their financial products eventually, according to a source with knowledge of major banks.

The FSA is investigating financial institutions’ deposit policy for the current fiscal year ending March 31, including if they have plans to raise charges on the use of automated teller machines or to start charging account management fees.