| TOKYO, April 1
TOKYO, April 1 Japan's biggest banks must do
more to involve smaller peers when seeking partners to finance
overseas projects, to support a regional banking sector facing
an uncertain future without a wider pool of borrowers, Japan's
new banking head said.
Many of Japan's more than 100 local banks have long been
stuffed with deposits but starved of loan customers caused by
two decades of economic stagnation - a state the government, in
office since December 2012, has promised to end.
Fearing loan profit being squeezed to an unsustainable
degree, the banking regulator has urged small banks to merge or
broaden their lending scope through, for instance, participating
in overseas project finance with the help of majors such as
Mitsubishi UFJ Financial Group Inc (MUFG).
Some regional lenders are eager to take part in financing
overseas energy or infrastructure projects, say bankers at major
lenders, but lack expertise as well as access to foreign
currency. The regulator wants majors to bridge the gap - as does
the new banking head, who is also president of MUFG.
"It is desirable for Japanese financial institutions with
ample funds to participate in these projects," said Nobuyuki
Hirano, who became chairman of the Japanese Bankers Association
on April 1.
Infrastructure development in Asia alone needs $8 trillion
in financing this decade. Regional banks have the funds, so
inviting them to join syndicates is "worth the effort," Hirano
told Reuters in an interview.
Japan's biggest regional bank by assets is Fukuoka Financial
Group Inc, based on the southwest island of Kyushu,
followed by Bank of Yokohama Ltd, Chiba Bank Ltd
and Hokuhoku Financial Group Inc, showed data
from Thomson Reuters.
NO.1 GLOBAL ARRANGER
Global banks often take the lead in arranging syndicates of
lenders to finance projects such as the construction of power
plants and roads. Syndicates can comprise just a few banks to
over 30, with each participant extending loans of varying
amounts for projects costing billions of dollars.
Japan's MUFG, Sumitomo Mitsui Financial Group and
Mizuho Financial Group Inc have arranged syndicates for
an increasing number overseas projects in recent years, helped
in part by European rivals retreating during the euro zone
sovereign debt crisis.
MUFG, Asia's biggest private bank by assets, ranked first
among global arrangers last year in terms of amount raised,
showed data from Thomson Reuters. SMFG and Mizuho ranked fourth
and fifth respectively.
One recent syndicate for a $5 billion oil refinery in
Vietnam involved Japanese regional lenders Shizuoka Bank Ltd
, Yamaguchi Financial Group and Chiba Bank.
Diversifying into overseas project finance strengthens loans
portfolios which at regional lenders are concentrated in local
economies, a Financial Services Agency official told a recent
meeting of regional bank heads, according to an attendee.
"We would like to provide support to financial intuitions
actively participating in overseas project finance," the
official said, according to the attendee who was not authorised
to discuss the matter publicly and so declined to be identified.
(Editing by Christopher Cushing)