The Financial Services Agency said Monday it has no doubt that Japanese banks will be able to meet the new international capital requirements agreed to Sunday in Basel, Switzerland.
The FSA said the new “Basel III” requirements are “generally balanced in terms of both (capital) levels and transition arrangements,” adding that Japan’s banks “can achieve (the goals) through management efforts.”
Global financial regulators agreed after their meeting in Basel that they will require banks to more than triple the amount of top-tier capital they must hold in reserves as part of their efforts to prevent credit crises like the one triggered by the Lehman Brothers bankruptcy in 2008.
The Basel accord will require banks with international operations to increase their high-quality capital, mainly consisting of equity and retained earnings, by stages starting in 2013 to at least 7 percent of risk-bearing assets in 2019, up from just 2 percent under current rules.
Among the biggest lenders in Japan, the newly designed core capital ratio is expected to stand at 7.41 percent at Mitsubishi UFJ Financial Group Inc. at the end of the current business year through next March, according to an estimate by Citigroup Global Markets Japan Inc.
Comparable figures will come to 6.35 percent at Sumitomo Mitsui Financial Group Inc. and 4.78 percent at Mizuho Financial Group Inc., Citigroup said. The two groups are likely to face having to increase their profits to meet the new capital rules.
Japan and Germany had argued that the decision to increase the capital requirement should not be made hastily. Meanwhile, the United States and Britain urged rapid reforms to the international banking regulation system amid strong public protests against governments bailing out troubled financial institutions with taxpayer money.
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