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Stricken Local Banks in Japan Buying Riskier Debt to Survive
- Some regional banks buying lower-rated foreign bonds, CLOs
- Investments leave banks more vulnerable to losses: Moody’s
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Struggling to revive profits as low yields persist, a handful of troubled Japanese regional banks are wading deeper into riskier credits such as near-junk rated overseas bonds, according to a Bloomberg survey.
Weaker regional lenders are fighting for survival as the government presses for consolidation in the industry, which has been wracked by shrinking rural populations. Unlike megabanks that can mitigate the blow from negative interest rates by diversifying more into businesses like investment banking, regional lenders sometimes lack the resources for such shifts.