February 19, 2020 / 7:37 AM / 6 months ago

Japan conducts emergency survey on its banks amid China virus outbreak: sources

TOKYO (Reuters) - Japan’s financial watchdog has begun conducting an emergency survey on domestic financial institutions with business operations in China to gauge how the coronavirus outbreak could affect credit costs, government sources said on Wednesday.

The virus has killed more than 2,000 people in China and has already taken a toll on the world’s second-largest economy, hampering supply chains for companies from car manufacturers to smartphone makers and disrupting tourism.

The Financial Services Agency (FSA) is surveying Japanese financial institutions over concern some of their lending to Chinese borrowers could sour, the sources said on condition of anonymity because they were not authorized to speak publicly.

Japanese financial institutions, including megabanks, have combined lending of more than 7 trillion yen ($63.57 billion) in China, as Japan’s ultra-low interest rates have driven them overseas in search of higher yields.

In the survey that started on Feb. 7, the FSA asked megabanks and regional lenders to report on their operations in China, the sources said.

The financial watchdog also called on lenders to be flexible in responding to borrowers’ requests for additional loans or changes in borrowing conditions, they said.

FSA did not immediately respond to a request for comment.

Many Japanese commercial banks have branch offices in mainland China and Hong Kong, mainly to lend and provide services to Japanese companies seeking to make inroads into the region’s huge market as Japan’s population dwindles.

Reporting by Takahiko Wada; Writing by Tetsushi Kajimoto and Leika Kihara; Editing by Chris Gallagher and Muralikumar Anantharaman

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