Japan regional banks: financial regulation

Research evidence excerpt

Japan regional banks: financial regulation

Japan regional banks: financial Global Markets Research 15 July 2026

regulation

EQUITY: JAPAN BANKS

Research AnalystsFSA assessment of risks to regional banks from

Japan bankshigher interest rates

Ken Takamiya - NSC

ken.takamiya@nomura.comQuick Note +81 3 6703 1140

Investment implications

The Nikkei reported on 15 July that the Financial Services Agency (FSA) plans to survey

the risks to regional banks from higher interest rates. While we have not confirmed the

accuracy of the report, we do not find it particularly surprising, as we assume that the FSA

has been keeping a close eye on the impact of higher interest rates on the regional bank

sector for some time. We assume that the impact of higher interest rates will vary widely

depending on the type and size of each regional financial institution, but we see no major

concerns overall regarding the regional banks under our coverage. We make no change

to our bullish investment stance on the regional banks sector. For more on ALM and

balance sheet management at banks, see our 10 July 2026 AnchorReport—Japan

bankssectorinvestmentstrategy(June2026)/Banks2.0:Re-imaginingJapan'sfinancial

sector.

Outline of Nikkei report

We identify the following three key takeaways. (1) The FSA will be talking to regional

banks throughout Japan starting in August to assess whether the banks’ operations are

prepared to cope with higher interest rates. The FSA will be checking on whether banks

are adequately positioned to handle competition for deposits and valuation losses on their

bond holdings, and if necessary will encourage corrective measures. In cases that are

deemed extremely serious, the FSA may carry out formal inspections. It is unusual for the