Japan's top banks are touting a plan to lift a 50-year-old ban on holding companies as the cure for what ails their industry, but analysts say it will take more than that to solve their problems.
We doubt that a simple change in ownership structure will result in aggressive restructuring of financial institutions, said Kathy Matsui, a strategist at Goldman Sachs (Japan).
She said restructuring was dependent on the will of managements, and it was doubtful if holding companies alone would spur the necessary changes in the troubled industry. Banks, groaning under massive bad loan problems, fear that Japan's Big Bang reforms will lead to a bloodletting that could end in the collapse of financial institutions which are in poor financial health. Many bank officials see the holding company route as the key to coping with reforms.
Under a holding company, barriers between banks, brokers and insurers could be broken down and major banks could streamline their financial groups and bail out weaker affiliates. The umbrella companies would also allow huge, inefficient corporate giants to split into several leaner operations. But most analysts are unconvinced about the banking industry's willingness to tackle large-scale streamlining. The market has been becoming more critical of Japanese banks in the past one or two months as they have delayed their disclosure of problem loans, said Yushiro Ikuyo, a first vice-president at Smith Barney International. Banks still appear to be hoping for a soft landing scenario and they lack a sense of crisis control, Ikuyo said.
Bankers, meanwhile, say they need a freer hand to establish financial holding companies. Concern is growing about Japanese banks' declining international competitiveness, so I would like (the government) to make sure that nothing will be done to reduce the effectiveness of holding companies, Shunsaku Hashimoto, the chairman of the Federation of Bankers' Associations of Japan said.
