The spread of social networking services has further increased the risk…A history of “bank run-ins,” which have unexpectedly occurred in Japan

Payoff system” and other measures are in place in case of emergencies.

In Japan, the payoff system protects deposits up to 10 million yen in the event of a bank failure. In addition, as in the U.S. and Europe, exceptional measures such as full protection of deposits, injection of public funds, and temporary nationalization are also in place.

Regarding financial instability in Europe and the U.S., the new BOJ governor Kazuo Ueda says that Japan’s financial system is sound and that Japanese banks have sufficient capital to withstand losses, saying, “Japanese financial institutions are well capitalized and have ample liquidity, and we do not expect this problem to have a major impact on our economy at this time.

While this is certainly true, there are some circumstances unique to Japan that are not found in the West. These are: 1) a shrinking domestic market due to population decline and depopulation, and 2) a shift away from banks due to the entry of different industries and the shift to digitalization. In particular, many regional banks are finding it virtually impossible to survive on their own, and are steadily restructuring their branches and workforces and merging with other banks to create a “one bank per prefecture” system in order to achieve economies of scale.

In Japan, it is unlikely that there will be an immediate outflow of deposits or a run on the banks, but a Reiwa version of a “run on the banks” will suddenly start through social networking services and Internet banking.

What is a “target bank”?

Are there any banks in Japan that could become targets?

Banks that have a high percentage of deposits via the Internet, a high inclination toward start-up companies, few transactions with local individuals and small and medium-sized businesses, small assets, large deposits, losses or declining revenues and profits, frequent scandals and system failures, large unrealized losses on bonds, weak capital, reluctance to merge or enter into business alliances, etc. are likely to be targets. are likely to become targets.

The most recent examples are Suruga Bank’s share house scandal and Mizuho Bank’s system trouble, which led to a temporary outflow of deposits.

In particular, be wary of deposits made via the Internet. While they can attract customers from all over the country regardless of their business area, they are also fast to flee because of their focus on interest rates. Once a rumor of financial instability is circulated on social networking sites, deposits can be cancelled or transferred with a simple click of a button.

Some regional banks and credit unions are conducting periodic mock drills as part of their business continuity plans (BCP), based on the assumption that a financial crisis may occur.

Both the financial authorities and financial institutions are beginning to prepare for the worst-case scenario, which could be a financial crisis originating in Japan, starting with the outflow of deposits via social networking services.