Cross-Shareholdings At Lowest Rates Since 1991: Japanese Banks Sell-Off Shares

Japanese Companies reduce their cross-shareholdings of allied companies to the lowest level since 1991. Banks sell shares due to narrower global capitalization requirements.

In the year that ended March 31, stocks owned with corporate allies dropped to 4.9 % of the nation’s shares. This represents a two-point drop from the previous year and the lowest rate since 1991.

Keisuke Nitta, a strategist at NLI Research Institute, explained that “Cross-shareholdings held by banks are based on relationships with clients, so it doesn’t mean that the shares they hold are ones that are likely to grow.”He continued “A lot of the superior shares have already been sold off. It means a lot of unattractive stocks are still on their books.”

Banks are positioning for new regulations decided upon by the Basel Committee on Banking Supervision which require Banks to double the Tier 1 capital reserve. Tier 1 capital includes cash and equities. Therefore, volatile and poorly performing stocks will lower a bank’s ability to lend.
Since the International Accounting Standards Board issued guidance last year that the current market value of shareholdings are required to be included in financial statements, companies are reducing their holdings.

Hidehiro Tomioka, who manages about $1.4 billion at the Japanese asset management u_wpnonce=b29c1b17d4

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