TOKYO, Oct 18 (Reuters) - Japan's major banks, including Bank of Tokyo-Mitsubishi UFJ and Mizuho Bank, have suspended sales of yen-denominated structured deposits after the country's financial regulator said some parts of them are not covered by a deposit insurance scheme, according to sources familiar with the matter.
Structured deposits usually tout higher interest rates than regular ones by using derivatives transactions, although depositors risk losing their principal depending on market moves.
Japan's deposit insurance scheme guarantees up to 10 million yen ($127,000) in principal and interest combined in case of a bank failure.
Sources said the watchdog Financial Services Agency recently reiterated its concern to the banking industry that interest on structured deposits, which depositors earn as option transaction fees, should not be covered by deposit insurance, prompting banks including Sumitomo Mitsui Banking Corp to stop offering such deposits.
The three banks and others announced the suspension of the service on their websites.