TOKYO (Reuters) - Profits from lending and fee business at Japan's smaller banks are falling faster than expected amid very low interest rates, with more than half the institutions losing money on these core operations, the country's financial regulator warns in a draft report.
The Bank of Japan's drastic monetary policy, with interest rates near or below zero, has squeezed lenders across the country, especially the more than 100 regional banks whose depopulating local economies are slumping.
Many of these smaller banks are staying in the black only thanks to securities trading, which could in turn open them to new risks, says the draft of an annual Financial Services Agency report, seen by Reuters on Wednesday.