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Banking & Finance

Japan banks to disclose sales commissions for transparency

Pamphlets for different insurance plans.

TOKYO -- Japan's five largest banks could voluntarily reveal how much commission they receive from insurance companies for selling their policies as early as the beginning of 2017, in a bid to signal more transparency to customers.

Single-premium and regular-premium life insurance plans accounted for 41% of sales commissions earned by banks in the first half of fiscal 2015, compared with 31% in fiscal 2012. Mutual funds, on the other hand, dropped from 62% to 53% over the same period.

Sales of policies denominated in foreign currencies, which offer relatively high yields, have gained ground in recent years. But banks on average receive a nearly 7% commission for selling these plans, compared with the roughly 2% for mutual funds, according to data presented by the Financial Services Agency at a Wednesday council meeting. The agency is concerned that higher commissions are pushing banks to sell more foreign-currency-denominated insurance.

In light of such concerns, Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank, Sumitomo Mitsui Banking Corp., Resona Group and Sumitomo Mitsui Trust Bank are considering making their commission schedules public as early as next year, even though the Financial Services Agency has not reached a decision on the matter. They are looking into placing brochures on bank counters, as well as offering explanations by salespeople at their branches.

In response to concerns from the regulators, the Life Insurance Association of Japan was preparing to disclose commissions on variable insurance plans -- where policyholders receive different payouts each year based on market conditions -- and foreign-denominated policies in October.

But making the figures public "will eventually create downward pressures on commissions," said a life insurance source. Regional banks, eager to boost commission income amid the Bank of Japan's negative interest rates, protested against becoming the only ones subject to disclosure rules. The Financial Services Agency decided to discuss the issue at the advisory panel to reach a wider agreement on commission transparency.

(Nikkei)

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