Su­ruga Bank to re­ceive $2.2b credit line Malaysia’s new gov’t sets big­ger bud­get

Viet Nam News - - ASIA BUSINESS -

TOKYO — Ja­pan’s scan­dal-hit Su­ruga Bank will re­ceive a credit line for as much as 250 bil­lion yen (US$2.2 bil­lion) from the coun­try’s cen­tral bank af­ter see­ing two quar­ters of de­posit out­flows, two peo­ple with di­rect knowl­edge of the mat­ter said.

The mid-sized lender in cen­tral Ja­pan is reel­ing from a scan­dal over re­tail prop­erty-in­vest­ment loans that has slammed its shares and led to the de­par­tures of top ex­ec­u­tives.

Reg­u­la­tors do not ex­pect Su­ruga to suf­fer a liq­uid­ity crunch but they have asked the lender to se­cure fund­ing from the Bank of Ja­pan (BOJ) to be ready for any con­tin­gen­cies, the sources told Reuters. They spoke on con­di­tion of anonymity, as they were not au­tho­rised to dis­cuss the mat­ter pub­licly.

Some de­pos­i­tors pulled money out of the bank in the wake of the scan­dal, with net out­flows of 220 bil­lion yen, equiv­a­lent to about 5 per cent of the lender’s to­tal de­posits, in the April-June quar­ter. The sources said out­flows con­tin­ued at roughly that level in the July-Septem­ber quar­ter.

That com­pares with vir­tu­ally flat lev­els for de­posits be­tween Oc­to­ber last year and March.

A BOJ spokesman de­clined to com­ment, say­ing the cen­tral bank does not dis­close spe­cific col­lat­eral con­di­tions. A Su­ruga spokesman said he could not com­ment on spe­cific trans­ac­tions. Of­fi­cials for Ja­pan’s Fi­nan­cial Ser­vices Agency were not im­me­di­ately avail­able for com­ment.

Shares in Su­ruga ended 2 per cent higher af­ter Reuters re­ported the move shortly be­fore the close of trade in Tokyo yes­ter­day. That gave the lender a mar­ket value of about $1.1 bil­lion.

The Shizuoka pre­fec­ture­based lender will use a pro­gramme in­tro­duced in 2016, in which the cen­tral bank ac­cepts ben­e­fi­cial in­ter­est of a trust in mort­gage loans as el­i­gi­ble col­lat­eral for fund­ing, the sources said.

The bank’s shares have fallen some 80 per cent since the start of the year when its trou­bles sur­faced. The scan­dal has sent rip­ples through Ja­pan’s bank­ing in­dus­try where Su­ruga was a dar­ling of in­vestors and a role model for carv­ing out a niche in a crowded bank­ing mar­ket.

Ja­pan’s bank reg­u­la­tor last month or­dered Su­ruga to stop mak­ing new loans for prop­erty in­vest­ments for six months, af­ter a third-party panel found that Su­ruga had been in­volved in fal­si­fy­ing doc­u­ments on loans made to in­vestors who built “share houses” where ten­ants share bath­rooms and other fa­cil­i­ties.

The gov­ern­ment also found that the bank had made im­proper loans to busi­nesses re­lated to the bank’s found­ing fam­ily, and had al­lowed “anti-so­cial el­e­ments”, a eu­phemism for or­gan­ised crime in Ja­pan, to open de­posit ac­counts.

The BOJ does not ac­cept mort­gage loans di­rectly as col­lat­eral, so Su­ruga’s as­sets will es­sen­tially be se­cu­ri­tised by a trust bank into ben­e­fi­ciary rights for the loans as a pack­age, which is el­i­gi­ble to be used as col­lat­eral with the cen­tral bank, the sources said.

Su­ruga will ini­tially pledge about 300 bil­lion yen worth of loans, which would en­able it to re­ceive 150 bil­lion yen from the BOJ, the sources said. It will later in­crease the pledged col­lat­eral to se­cure up to 200-250 bil­lion yen in fund­ing, they said. — REUTERS KUALA LUMPUR — Malaysia an­nounced an ex­panded bud­get for 2019 and fore­cast a wider fis­cal deficit as Prime Min­is­ter Ma­hathir Mo­hamad’s new ad­min­is­tra­tion tus­sles with shrink­ing rev­enue and a large debt left by the pre­vi­ous ad­min­is­tra­tion.

The new gov­ern­ment is re­set­ting “its fis­cal con­sol­i­da­tion path start­ing from 2019 to ac­count for nar­row rev­enue base, ad­di­tional pro­vi­sion for off-bud­get items and tax re­funds,” it said in a fis­cal out­look re­port re­leased on Fri­day along­side the pre­sen­ta­tion of next year’s bud­get.

Malaysia has bud­geted 314.6 bil­lion ring­git (US$75.53 bil­lion) for gov­ern­ment ex­pen­di­ture in 2019, up 8.3 per cent from this year’s re­vised bud­get of 290.4 bil­lion ring­git, ac­cord­ing to the re­port.

To­tal rev­enue is pro­jected to rise to 261.8 bil­lion ring­git next year, up from 236.5 bil­lion ring­git from 2018.

The gov­ern­ment said it has de­cided to set­tle out­stand­ing tax re­funds of around 37 bil­lion ring­git, much of which will be funded by a one-off spe­cial div­i­dend of 30 bil­lion ring­git from state en­ergy firm Petronas.

The oil and gas com­pany will also pay a reg­u­lar an­nual div­i­dend of 24 bil­lion ring­git, ac­cord­ing to the re­port.

The fis­cal deficit, which is closely tracked by rat­ings firms, is ex­pected to hit 3.4 per cent of gross do­mes­tic prod­uct in 2019. The deficit will come in at 3.7 per cent for this year, higher than an ear­lier fore­cast of 2.8 per cent, the gov­ern­ment said.

It is un­der­tak­ing a more rig­or­ous ex­pen­di­ture op­ti­mi­sa­tion ex­er­cise, the re­port said, adding that a tax re­form com­mit­tee has been set up to re­view tax in­cen­tives and ex­plore new sources of rev­enue.

Fri­day’s bud­get an­nounce­ment is the first by Ma­hathir’s gov­ern­ment since Malaysians ended for­mer leader Na­jib Razak’s near decade long rule at a gen­eral elec­tion in May.

An­a­lysts had widely pre­dicted cuts to pub­lic spend­ing, es­pe­cially af­ter Ma­hathir in Oc­to­ber an­nounced plans to re­duce de­vel­op­ment spend­ing and blamed Na­jib’s ad­min­is­tra­tion for sad­dling the coun­try with debt of more than 1 tril­lion ring­git.

Rev­enue col­lec­tion had also taken a hit af­ter the new gov­ern­ment scrapped a six per cent con­sump­tion tax and rein­tro­duced fuel sub­si­dies ear­lier this year.

In an eco­nomic re­port re­leased on Fri­day, Malaysia said it will cut pub­lic spend­ing sharply de­spite fore­see­ing the econ­omy grow­ing more slowly. — REUTERS

Su­ruga will ini­tially pledge about 300 bil­lion yen worth of loans, which would en­able it to re­ceive 150 bil­lion yen from the BOJ. — Photo ft.com

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