The Bank of Japan and the nation's banking regulator have told the U.S government they are worried that the controversial Volcker rule could hurt trading in Japanese government bonds.
The so-called Volcker rule, which would limit banks' trading with their own funds, could make JGB trading less attractive and profitable, said a letter addressed to US monetary and financial authorities.
"Some of the Japanese banks might be forced to cease or dramatically reduce their US operations and Japanese subsidiaries of US banks may consider exiting from JGB trading," it said.
In the letter, dated December 28 but only made public on Thursday, the BOJ and the Financial Services Agency then called on Washington to expand the range of exempted securities substantially to include JGBs.
A trader at a Japanese bank said that domestic banks may need to scale back some of their operations in New York but that so far there had been no price movements in the JGB market to suggest that it was worried about a large impact on liquidity.
The Volcker rule aims to restrict banks from engaging in speculative investments that do not benefit their customers, and will apply to foreign banks' US subsidiaries as well as to domestic institutions.
Comments
Comments are closed.