Mega bank presses higher lending rates to 'healthy' borrowers
One of Japan's major banks is bullying small- and medium-sized firms by forcing them to accept unreasonably high lending rates.
Akahata of December 9 reported that it has obtained a Sumitomo Mitsui Banking Corporation (SMB) document showing that the bank has pressed its "good-standing" borrowers to accept a sharp rise in the lending rate.
The report said that an SMB employee this past summer visited an SMB's long-term prime customer in Tokyo, whose annual sales are about 700 million yen to demand that the customer accept a new lending rate of 10 percent instead of the current 2 percent, saying, "Your company is ranked the lowest." The president of the borrower company declined to accept the steep increase in the rate.
"This high-handedness of the bank apparently is a product of the Koizumi Cabinet's policy of urging banks to quickly 'write-off bad loans,'" says Miyamoto Takashi, a consultant of the Japan Business Club.
The Financial Services Agency urges banks to be strictly selective in extending loans, streamline reserves for possible loan losses, and maintain capital ratios of at least 8 percent. Miyamoto sees the banks as trying to force borrowers, mostly smaller businesses, to pay the costs.
Banks can only change lending rates in conjunction with a change in the Bank of Japan's official discount rate. I see no justification for what the SMB is doing.," Miyamoto said. (end)