Japanese banks' credit ratings and share prices may decline as global regulators consider measures that seek to avoid the use of public funds to rescue failing lenders, Mitsubishi UFJ Morgan Stanley Securities Co. said.
"The prices of some of Japan's major bank stocks could fall by over 20 percent once expectations of capital injections and other forms of government support disappear," Junsuke Senoguchi, a senior analyst at MUFJ Morgan Stanley, wrote in a report. The absence of a public backstop would lower banks' credit ratings and drive funding costs higher, eroding profitability, he said.
Under draft proposals made by the Financial Stability Board last month, creditors would have to share a greater burden following a bank's collapse to shield taxpayers from rescuing the lender.