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Transcript
Sapienza Università di Roma
International Banking
Lecture Twelve
Banking in Japan
Prof. G. Vento
Agenda
• Introduction to Banking in the United States
• Structure of the Banking and Financial System in the
US
• Key issues of US Banking Industry
• Banking Regulation in the US
April 2013
Internaional Banking - Prof. G. Vento
Introduction to Banking in Japan
• Japan has a bank-based financial system
• Banking system has traditionally played a more
important role than the stock market
• Wide array of different types of banks
• The largest public bank is the Postal Savings Bank
• Major financial crisis in 1997-98
• Wide range of reforms during the 90s.
April 2013
Internaional Banking - Prof. G. Vento
Structure of Japanese Banking System
•
•
•
The Japanese banking
system has experienced
difficult times in recent years
as a consequence of the
downturn in the domestic
economy.
Property prices / bad debts
generated the crisis in 1997
– 98.
Both public and private
financial institutions
April 2013
Internaional Banking - Prof. G. Vento
Bank Structure in Japan
• Keiretsu system
 A Keiretsu is a group of companies
with cross-shareholdings and shared
directorships which normally include
a bank, trust company, insurance firm
and a major industrial concern (i.e.
cars, steel)
• The bank supplies services to the
other keiretsu members, including
loans
• The Ministry of Finance (MoF) was
the key regulator through three
bureaux: Banking, Securities and
International Finance
April 2013
Internaional Banking - Prof. G. Vento
Bank Regulation in Japan
• MoF’s responsibilities included all aspects of financial
institution supervision: examination of financial
firms, control of interest rates and products,
supervision of the deposit protection scheme, setting
the rules on activities to be undertaken by financial
firms
• Bank of Japan was responsible for the
implementation of monetary policy, but under the
influence of MoF
• High protected market
• Japanese companies largely dependant on banks’
loans
April 2013
Internaional Banking - Prof. G. Vento
Japan’s Big Bang (1996)
• 1989: crash of Japan stock market
• Big Bang based on:
- end of functional segmentation; integration of
banking, insurance & securities; liberalisation of
financial products and prices; no restriction to
short/long-term operations; commission liberalised;
disclosure
- restoring financial stability through Financial
Supervisory Agency and Financial Reconstruction
Commission, merged in 2001 in the Financial Services
Agency
- more transparent rules
April 2013
Internaional Banking - Prof. G. Vento
Private deposit-taking institutions
• City banks. The city banks are the largest banks in
the Japanese banking system and account for over
50% of total banking sector assets.
• They are commercial banks that offer a full range of
banking services.
• Regional banks. Focused on retail financial services
and SMEs.
• The majority of regional banks are publicly quoted
April 2013
Internaional Banking - Prof. G. Vento
Private deposit-taking institutions
• Trust banks and long-term credit banks.
• Trust banks perform commercial banking activity
but their main function is asset management for
retail and other customers. Japanese households
place funds to these banks, which they invest on
clients’ behalf.
• Long-term credit banks provide medium- and longterm finance to the corporate sector.
• Cooperative banks. They play a major role in the
Japanese banking system.
April 2013
Internaional Banking - Prof. G. Vento
Private non-deposit-taking institutions and public
financial institutions
•
•
•
•
Private non-deposit-taking institutions. They include a wide
variety of securities, insurance and other firms.
public financial institutions. They perform a significant role in
financial system.
Post Office has over 24,000 branches. Japan’s postal saving
system is the world’s largest financial institutions in terms of
deposits.
Development banks. They direct lend to certain sectors.
April 2013
Internaional Banking - Prof. G. Vento
Balance sheet features and performance
•
•
•
•
Between 1996 and 2005 bank lending portfolios have
declined by around 30% reflecting the lack of demand and
the increasing number of bad loans that had to be written
off.
The decline in lending and the increase in liquid assets is an
indication of the weak state of the domestic economy.
Also deposit decreased.
ROE values are very low by international standards, mostly
because bad loans
April 2013
Internaional Banking - Prof. G. Vento
Banking crisis in the 90s in Japan
•
•
•
Excessive lending (portfolio concentration).
Negative impact of asset price deflation
Policy failure to contain problem
April 2013
Banking industry in Japan: Recent trends
• According to the latest estimates, Japan recorded a sharp
expansion in GDP in the fourth quarter (3.8 per cent on an annual
basis, against a contraction of 0.6 per cent in the third quarter),
thanks mainly to the robust increase of 22 per cent in exports.
• Private consumption performed well again, growing by 2.8 per
cent thanks partly to a series of incentives for purchases of
durable goods. Non-residential private investment returned to
growth after a year and a half, expanding by 3.8 per cent, while
residential investment declined sharply again, contracting by 12.5
per cent.
• The latest cyclical indicators offer contradictory signals regarding
the strength of the current recovery.
April 2013
Internaional Banking - Prof. G. Vento
Banking industry in Japan: Recent trends
• The deflationary trend shows no sign of receding. The rate of decline in
consumer prices moderated from 1.7 per cent in December to 1.1 per
cent in February, but excluding food and energy prices it remained
basically unchanged at 1.1 per cent.
• According to the forecasts of the private analysts surveyed by
Consensus Economics, deflation will continue in 2010 at an average
annual rate of 1.1 per cent. The Bank of Japan has held its monetary
policy reference rate unchanged at 0.1 per cent.
• In order to foster a fall in long-term interest rates, in mid-March it
decided to double to ¥20 trillion (about 4 per cent of GDP) the amount
of liquidity that will be provided to the market by means of threemonth guaranteed loans under the facility introduced in December.
April 2013
Internaional Banking - Prof. G. Vento
Next Lecture:
BANKING IN UK
April 2013
Internaional Banking - Prof. G. Vento