Press Conference by KATO Katsunobu, Minister of Finance and Minister of State for Financial Services

(Excerpt)

(Tuesday, March 11, 2025, 9:40 am to 9:47 am)

Q.

Accompanying the interest-rate hike by the Bank of Japan, financial institutions are increasing lending, especially the provision of structured loans. The issue of structured loans has so far been picked up on such occasions as exchange of views between the FSA and financial institutions. Could you explain again what you think of the risks of structured loans?

A.

The system of structured loans consists of a mechanism in which financial institutions lend money to so-called SPCs and SPCs purchase government bonds or conduct derivatives trading. They look like ordinary loans but involve different risks in reality. Regional banks, in particular, are increasing their provision of structured loans, mainly repackaged JGB loans.
In light of such development, on occasions such as dialogues with financial sector associations, the FSA has requested reginal banks to develop their risk management systems in consideration of the characteristics of structured loans and provide explanations appropriately to shareholders or other stakeholders for whom structured loans account for a considerable portion of all of their loans.
We will continue checking their risk management systems and disclosure policies regarding structured loans by holding interviews with regional banks that are considered to have a large outstanding balance of structured loans.