June 17, 2014 / 6:36 AM / 4 years ago

Bank of Japan sets up senior post to monitor regional lenders

TOKYO, June 17 (Reuters) - The Bank of Japan has set up a new senior post to monitor the country’s regional lenders, in a sign authorities are increasingly concerned about the future prospects of the industry.

Japan has a little over 100 regional banks that are coming under pressure as the pool of local borrowers shrink, prompting banking regulators to call for industry consolidation. To win borrowers, banks have lowered interest rates at the expense of profitability.

The central bank set up a separate team within the Financial System and Bank Examination Department this week tasked with monitoring regional lenders, and appointed Satoshi Nagano as deputy director-general.

The move was designed to beef up the central bank’s dialogue with heads of regional banks over management and other issues, BOJ officials said.

The Financial Services Agency (FSA) is the banking regulator which monitors lenders and has powers to impose penalties. The BOJ, on the other hand, separately monitors lenders to ensure stability in the broader financial system and the health of counterparties involved in central bank operations.

The BOJ’s move came as the FSA has been cranking up pressure on heads of regional banks to come up with a viable plan for the survival of the industry in the next decade, including mergers with rivals.

Regional banks are largely tied to the fortunes of their local prefectures. Aside from Tokyo, Osaka and a few other cities, the outlook for the working-age population - and thus the prospect for loan demand - is grim.

Reporting by Sumio Ito and Taiga Uranaka; Editing by Jacqueline Wong

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