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The nation’s regional banks, desperate to boost returns with interest rates around zero, are coming under scrutiny from regulators as they increase purchases of risky investment trusts.

The Financial Services Agency (FSA) has been talking to bankers to gauge whether the firms have the knowledge and structure to handle those products, which cover everything from stocks to real estate, according to its officials. Some of the lenders don’t appear to, the regulators say. The FSA has told them to strengthen their risk management, for example by adding staff if needed, said the officials who asked not to be identified due to the agency’s policy.

Regional banks have struggled in recent years as a shrinking population and narrowed lending margins hurt their loan business, while investment in government bonds loses its appeal with yields below zero. To boost returns, so-called first-tier regional lenders poured a record ¥1.94 trillion ($18 billion) into a category of securities that includes investment trusts and other funds in the year ended in March, according to Regional Banks Association of Japan data, bringing the total outstanding amount to ¥7.02 trillion.

“To put it simply, they are taking on more risk,” said Ryoji Yoshizawa, an analyst at S&P Global Ratings in Tokyo. It would be a problem from a credit perspective if banks lacking sufficient capital or solid profitability keep adding those investment trusts, he said.

Investment trusts in Japan are like mutual funds in the U.S. — financial institutions such as brokerages raise money from investors and management firms make investments with the funds. Privately placed trusts are sold mostly to financial companies, and there were more than 5,000 of those funds covering equities and bonds in Japan as of August that managed a combined ¥78.81 trillion, according to the Investment Trusts Association.

Japanese lenders’ foreign debt holdings have also been monitored by the FSA after investors suffered losses last year due to the jump in U.S. interest rates on Donald Trump’s election to the White House. Five of 11 regional banks surveyed by Bloomberg said the surge in U.S. Treasury yields caused significant damage to their portfolios.

Some of those banks are turning toward private equity, hedge funds and real estate in search of higher returns, according to the survey.

Regional banks accounted for 40 percent of the ¥1.36 trillion being invested in Japan’s private real-estate investment trusts as of June, according to the Association for Real Estate Securitization. They are less liquid than regular REITs traded on the exchange, and their owners generally have to ask the issuers to take their shares back or find buyers through financial firms if they want to exit.

Other regulators have also been eyeing some of the risks.

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