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Japan to crack down on struggling regional banks

Many lenders that serve localities have scant prospects of improvement

The FSA will incorporate measures of future viability when assessing the regional banks.   © Reuters

TOKYO -- Regional banks in Japan that are barely getting by will soon face even greater pressure from the government to overhaul operations in an effort to grapple with a sector battered by shrinking populations in the countryside and years of ultra-low interest rates.

The Financial Services Agency, the state watchdog, plans to reform its early intervention regime governing regional banks. Currently, problems with current capital adequacy ratios, mainly due to bad debts, trigger FSA action. But that scope will expand to include future profitability, an approach that address the broader chronic issues that have plagued the sector.

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