Japan's Mizuho Financial Group can meet additional capital requirements without raising funds if it becomes subject to stricter global rules under consideration for banks deemed "too big too fail", its CEO said.
International regulators are expected to draw up a list by mid-2011 of banks whose collapse would pose a threat to the global financial system, and institutions on the list could be required to boost capital further.
"Even if we were categorised in that group, we would be able to clear hurdles by doing what we are already doing," Mizuho President and CEO Takashi Tsukamoto told Reuters in an interview.
"This does not mean capital raising. We can manage by efficiently streamlining our risk assets and making further cost-cutting efforts," added Tsukamoto, who took over at Japan's second-largest bank by assets last year.
With the tough new bank rules known as Basel III having been finalised, investors are focusing on which institutions regulators will deem Systemically Important Financial Institutions, or SIFIs. Regulators are expected to decide which banks will be picked as global SIFIs (G-SIFIs) by the middle of next year, followed by discussions on what additional requirements, including capital surcharges, would be levied on them.
Mizuho could make it onto the list of such banks due to its efforts to expand its global business, Tsukamoto said. "(G-SIFIs) is a regulatory category and it is not a privileged club, so it is not something we aspire to be. Our aim is to make further efforts in global expansion," he said.
Under Basel III, banks are required to maintain a Tier 1 capital ratio of at least 7 percent, including a capital conservation buffer of 2.5 percent. Mizuho, which has raised 1.28 trillion yen ($15.4 billion) in two rounds of fundraising over the past two years, expects to have a common equity ratio of more than 8 percent when the Basel III rules start in 2013.
Still, the bank is the least capitalised among Japan's top three lenders, which also include top-ranked Mitsubishi UFJ Financial Group and No 3 Sumitomo Mitsui Financial Group, stoking investor concern that it may need fresh capital.
Uncertainty over the new regulations and the impact they will have on Mizuho's earnings outlook means Mizuho will not for the time being boost its cash dividends to placate shareholders, Tsukamoto said. "It does not make sense to change (the dividend policy) when we have (a lack of) visibility on regulations and the business environment," he said.
Known for occasional, uncharacteristic flashes of temper at meetings when managers resist his efforts to overhaul the megabank, Tsukamoto, 60, a graduate of Harvard Business School, has devoted much of his attention to ending internal turf wars. He is rejigging Mizuho's senior management in a bid to end rivalries that have persisted since Mizuho's creation a decade ago through the merger of three rival lenders.
Faced with sluggish loan demand at home and weak growth prospects for the Japanese economy, Tsukamoto is also trying to woo investors by stepping up its overseas expansion. Unlike its two rivals MUFG and SMFG, however, Mizuho prefers to expand its business without relying heavily on acquisitions, Tsukamoto said.
"Basically, we have enough business resources to achieve growth in an organic way, although we are not ruling out the possibility of acquisitions," Tsukamoto said.
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