11 May 2010

Yoshikuni: This time Asia is different

Shinichi Yoshikuni, senior advisor to Mizuho Securities, said that Asian financial institutions are based on different government structures and business practices than those in the US and the EU. Accordingly, they have not suffered seriously from the North Atlantic crises.

Speaking at the ICSA event in Istanbul, Yoshikuni outlined the growing importance of Asia as a financial centre. Asian financial institutions have not suffered seriously from the North Atlantic crises. Also, they are based on different government structures and business practices than those in the US and the EU.

 

Asian financial institutions are depended upon relationship banking supported mainly by stable retail deposits and may require less capital compared with those operating under the originate-to-distribute model, he said.

 

On Basel III, he warned against focusing too much on the pillar I capital adequacy ratio as that would lead to distorted risk-taking incentives and might damage the stability of the financial system. In particular, setting overly rigid regulations on innovative financial instruments would seriously undermine the development of efficient financial markets in emerging economies, he warned.

 

With regard to procyclicality, there are no specific measures in the proposals that deal with the problem, he said. There is a lack of macro-prudential buffers to alleviate the adverse impact of tighter regulation, he noted.

 

Finally commenting on the proposed Volcker rule and the too big to fail issue, Yoshikuni said that Asian financial institutions, including Japan, would have some sympathy with its motive, i.e. to go back to the basics of finance. However, it must be ensured that the rule does not undermine the basic function of global markets, he underlined.