The Resona banking group is thinking of pursuing capital tieups with brokerages or other companies to improve services for listed firms and other corporate borrowers, Resona Holdings Inc. President Hiroyuki Mizuta said in a recent interview.
“Since we don’t have any investment banks or brokerages in our group, we have to consider teaming up with firms in such businesses,” Mizuta said.
The idea suggests the profit-challenged banking group is planning to shift strategy to helping corporate borrowers raise funds in the market and make lending decisions based on applicants’ future prospects rather than their collateral.
Resona owes the government 2.9 trillion yen from a public bailout it received in 2003 and is lagging behind other recapitalized banking groups in paying those funds back. However, Mizuta indicated repayment would be possible, eventually.
In 2003, Resona Bank found itself in a crisis and was effectively nationalized after requesting a massive cash infusion from the government to bolster its crumbling capital.
If Resona does decide to forge a capital alliance with another firm, the partner could buy the shares that Resona issued the government in exchange for the bailout, Mizuta said.
He also said Resona is interested in going into the business of uncollateralized loans for individuals and small firms.
Mizuta said the ongoing debate on nonbank consumer lenders’ exorbitant interest rates could cause considerable turmoil in the consumer credit market. However, that may give banks a precious opportunity to take a share of the lucrative market, he said.
“If banks had made a serious push into this area of business, the matter of high interest rates would never have become an issue,” Mizuta said.
He indicated his bank intends to make the foray into loans for individuals and small businesses on its own, while abiding by the standards for legal compliance and disciplined business conduct.
The law on lending rates restricts the maximum rate to 20 percent per year, but another one governing moneylenders permits interest rates of up to 29.2 percent if the borrower agrees to the loan terms.
This legal loophole has allowed moneylenders to extend loans at rates between the two ceilings, raising suspicions about their business practices.
A panel from the ruling Liberal Democratic Party has been mulling stiffer regulations for consumer loan companies. Last week it adopted proposals calling for an upper limit of between 15 percent and 20 percent to be placed on interest rates for consumer loans.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.