Japan gov't eyes tougher monitoring of overseas operations at big banks

Japan's financial watchdog is planning to intensify oversight of overseas activities of major banks, according to a draft of its annual financial administration policy. The move by the Financial Services Agency highlights challenges in comprehending the full scope of large financial groups as they expand globally, according to sources familiar with the matter.

The agency aims to assess how overseas operations of these banks could impact their management under unexpected conditions, such as global market instability like the 2008 financial crisis or a sudden economic downturn. It will also scrutinize if the banks' corporate governance and risk management systems align with their business strategies, collaborating with the Bank of Japan and foreign regulators.

This development stems from worries that significant losses overseas by major Japanese banks could destabilize the nation's financial system and hinder various domestic financial services. Recently, large banking groups have been increasingly engaged in overseas mergers and acquisitions. In April, Mitsubishi UFJ Financial Group Inc. invested around 680 billion yen ($4.3 billion) in a major Indian non-bank lender.