Foreign Currency Funding of Major Japanese Banks - Review of the March 2020 market turmoil -

Ryo Aoki, Kunimasa Antoku, Shunsuke Fukushima, Tomoyuki Yagi and Shinichiro Watanabe
Additional contact information
Ryo Aoki: Bank of Japan
Kunimasa Antoku: Bank of Japan
Shunsuke Fukushima: Bank of Japan
Tomoyuki Yagi: Bank of Japan
Shinichiro Watanabe: Bank of Japan

No 21-E-4, Bank of Japan Review Series from Bank of Japan

Abstract: Most of the major Japanese banks have endeavored to stabilize their foreign currency funding by increasing long term market-based funding and corporate deposits while expanding their overseas lending. In March 2020, when tensions in the international financial and capital markets increased due to the spread of Covid-19, USD lending surged due to the drawdown of commitment lines and other factors. The efforts of individual banks to stabilize their USD funding, as well as the effectiveness of USD funds-supplying by the six major central banks, prevented a major disruption in Japanese banks' USD funding. However, the importance of enhancing the robustness of USD funding structures was reaffirmed, as evidenced by the apparent vulnerability of short-term market-based funding at the height of the stressed environment. Appropriate management of foreign currency liquidity risk is crucial, not only for the stable operation of individual banks but also for the stability of the financial system as a whole. Japanese banks, for which foreign currency funding is one of the most important management issues, need to maintain efforts to strengthen their funding base and upgrade their risk management.

Date: 2021-10-13
New Economics Papers: this item is included in nep-ban, nep-mon and nep-rmg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.boj.or.jp/en/research/wps_rev/rev_2021/data/rev21e04.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boj:bojrev:rev21e04

Access Statistics for this paper

More papers in Bank of Japan Review Series from Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Bank of Japan ().