Japan’s current capital adequacy rules are in line with Basel III, the international financial regulatory framework introduced after the financial crisis that followed the 2008 collapse of US investment bank Lehman Brothers.
The rules require internationally active banks to maintain capital-to-asset ratios of at least 8 per cent, while domestic banks must keep ratios of at least 4 per cent.
The amount of capital banks must hold depends on the type of assets they own.
Stocks are treated as relatively high-risk assets because they carry a greater chance of becoming worthless.
[Copyright The Jiji Press, Ltd.]
