Japan's Norinchukin Bank Is Neither SVB Nor Lehman: Bloomberg Intelligence
Why are other banks across Japan insulated from this crisis that seems to be a little bit more. Ring fence around No2 at this point. Yeah, hi. So in the case of no tube the problems at the bank stem from a negative carry in the investment portfolio and that's largely due to their funding costs. No choose dollar funding costs are foreign currency funding costs came up to little over 5% last year and that's the stock contrast to the other banks and that primarily stems from their lack of Co deposits in the overseas markets. And so no to relied on confidence sensitive institutional funding and that's expensive. And they weren't earning the same carry and that led to the net loss. And what's lost in the story is the fact that no, you generated a net loss in the last couple of quarters. So, but that's unique to them. It's really interesting about this bank is that they also suffered massive losses after the global financial crisis, right when it comes to trying to restructure their portfolio. How difficult will it be? So the challenge is meeting the funding costs for them and how do you generate enough earnings from a securities portfolio and also meeting the bank regulatory capital needs. And so in order to do that they need to add high generating assets with low capital costs and I think that's the challenge for them. How difficult, there aren't that many options where you can generate over 5% on a risk free basis, so. One of the likely outcomes is they probably may need to deleverage the balance sheet. If they're looking to raise more capital, first of all, are they going to do that, do you think? And who might that try, try and tap for that? So there is talk that they intend to raise capital and. The the only option for them is to go to their cooperative members and that's a requirement for them by law. So as a result, that's their only source of capital. Can they do that? They probably could.