TOKYO Oct 17 Banks in Japan should focus more
on a company's potential rather than whether it has a solid
track record when deciding whether to lend money, draft
guidelines from the county's financial regulator showed.
The guidelines are a part of Japan's Financial Services
Agency's annual review which sets out what the regulator will
focus on in the coming year, and which will be published in full
later this week.
Efforts to get banks to lend more freely to companies with
growth potential are part of a broader push to help revitalise
the country's economy. Japan's economy, the world's third
largest, is seen as lacking momentum following a recent run of
weak export, factory output and household spending data.
The banks currently focus too much on whether companies have
enough collateral and strong track record when deciding to make
loans, a policy that favours established companies, FSA said in
the draft reviewed by Reuters on Monday.
The banks' focus on past performance - which the regulator
calls "financial exclusion" - makes it difficult for companies
with high growth potential, such as start-ups, to borrow money.
Japanese banks' have already faced criticism of their
lending policies and assessment of credit worthiness, which is
often seen as heavily based on the value of collateral put
forward by potential borrowers.
"Focusing on the sustainability of business models in the
future is more important than checking the companies' past
financial health," the FSA said in the draft of its new
"The changes in risks surrounding financial institutions are
rapidly accelerating. In addition to checking existing risks,
the ability to grasp and respond to new risks is ever more
The draft guidelines also pointed out the need to improve
regional financial institutions' business models as negative
interest rates hurt their profit margins. The Bank of Japan
adopted negative interest rates in a surprise move in January.
(Writing by Minami Fuakoshi; Editing by Jane Merriman)