Japans Banks: Home and Away Critique

http://www.economist.com/node/18233464?story_id=18233464

The reason I chose to critique this article is because of the fact that if it was wrote a couple of weeks later, it would have severely change the thoughts as to what the three main banks should do as a result of the disaster that has occurred there recently . As mentioned in the original post the japanese banks are in question about what they should do with their tons of cash. They are in this bind because of previous sketchy dealing with Japanese firms, and because of the way the Japanese firms handle their own cash. Another problem holding Japanese banks from bringing their money to foreign countries is that the G-SIFIS are required to hold more reserve ratio, or more equity than liability. All of this is because of the new BASEL III regulations. Lastly the Japanese government has put on a legal suspension for debts owed for the next three years before the banks can move abroad.

As presented above, the Japanese banks have numerous obstacle before they can start spending there boatloads of cash. Interestingly enough though, as the recent natural disasters that have just happened in Japan, the banks might become the saviors of the country. If they approach this situation in the right way they could benefit greatly from it. With the tons of excess cash, and no where to spend it, the banks could use this money to loan to the government to help rebuild and clean up Japans destroyed areas. As a result from these helping the government could potentially release their suspensions on the bank which would then allow for the banks to bring their business to foreign countries. This is all hypothetical in that it depends on how the banks approach this situation and use it to their advantage. If done correctly this could also help the Japanese business in the sense that they know the banks will be more responsible in their dealings this time around instead of like before. With the new trust built between the too a great relationship could build and prosper so that instead of businesses using the market for financing they will tend to look towards the banks.

If I was a manager at one of these 3 major banks, I would not look at the natural disasters that just happened as completely bad for the economy, but it will take careful approach of the banks to use it to their advantage

POSTED BY
CONNER DUBOIS