Japan's banking upstarts are facing big challenges in terms of overcoming high operational risks and securing profitability, Standard & Poor's Corp. said Thursday.

The U.S. credit-rating agency also said in a report that its ratings on the industry newcomers will largely depend on their parent firms' credit standings.

Banks launched recently include Internet-only banks Japan Net Bank, Sony Bank and eBank, as well as a niche bank specializing in settlement services at convenience stores called IY Bank.