Regional Financial Institutions: Strategies Should Be Devised to Revitalize Local Economies

Editorial

16:35 JST, March 8, 2026

Revitalizing regional economies remains a long-standing challenge. With the advent of an era in which financial markets are undergoing significant changes, regional financial institutions must fulfill a key role in supporting local areas.

In December last year, the Financial Services Agency drew up plans to reinforce regional financial strength, targeting financial institutions such as regional banks, shinkin banks and credit unions. This comprehensive policy initiative is the first of its kind since the government launched efforts in 2003 to resolve nonperforming loans and a reluctance to lend.

In response, the government obtained Cabinet approval of a bill to revise the law on measures for strengthening financial functions. It aims to pass the bill during the current special Diet session.

During the prolonged era of stagnant prices and ultralow interest rates, earning interest margins through lending was difficult. Amid these circumstances, financial institutions increasingly shifted to a defensive management approach, redirecting funds toward safer investments such as government bonds.

However, with the full-fledged arrival of an “economy with positive interest rates,” the momentum to pursue higher growth is building even among companies in regional areas. Financial institutions now have an increasingly important role in revitalizing regional economies. Strengthening support measures in line with the changing times is timely.

The focal point of the envisaged measures is expanding and improving public support systems.

Specifically, the government plans to effectively make permanent the existing public fund system that supports financial institutions with weak fiscal foundations. It also plans to continue the grant system that subsidizes part of the costs incurred during business integration. In light of the increasing severity of disasters, the measures call for the public funding support system in case of emergencies such as earthquakes to be made permanent.

To enhance lending capacity, it is essential to strengthen the foundations of management first. Regional financial institutions should consider actively taking advantage of these measures.

As long as public support is being expanded, it is imperative that the FSA strengthen its oversight system. Incidents such as the misconduct by Iwaki Shinkumi must not be repeated.

Meanwhile, the measures also call for allowing subsidiaries of regional banks to engage in intermediary services for merger and acquisition deals in order to support regional businesses. This initiative is intended to enable financial institutions to broadly respond to corporate needs.

It is crucial for executives at financial institutions to fully recognize their responsibility for supporting regional areas. They should utilize such new systems to back small and midsize enterprises.

There is an increasing number of cases in which regional banks have exercised creativity. In collaboration with a local newspaper company, Fukui Bank has developed an app that is the key in operations such as issuing a digital currency that can be used in the region. Due to the app being highly convenient, membership is growing.

Senshu Ikeda Holdings, Inc. based in the Kansai region has made inroads into a ride-sharing service with the use of artificial intelligence because maintaining public transportation has been a regional challenge.

It is hoped that financial institutions will compete over coming up with ideas to drive regional development.

(From The Yomiuri Shimbun, March 8, 2026)