(Bloomberg) -- Norinchukin Bank officials briefed a panel investigating losses that Japan’s largest agricultural lender incurred by investing in foreign bonds, kicking off a process designed to prevent a repeat of the fiasco.
The group of outside experts were also briefed by the farm ministry, which supervises the bank jointly with the Financial Services Agency, according to a ministry official. The ministry told the panel that Norinchukin has capital above regulatory requirements and its financial health is sound.
The panel members, led by Yusuke Kawamura, former deputy chairman of Daiwa Institute of Research, expressed their views on Norinchukin’s actions following rate hikes by the US Federal Reserve and other central banks, according to the official. They also made comments on governance on the bank’s portfolio management, he said, asking not to be identified in accordance with the ministry’s policy.
Norinchukin’s top management, including CEO Kazuto Oku, also attended the meeting as observers, the official said. Other panel members include Meiji Gakuin University Professor Yuri Sasaki and Kazutoshi Inano, former chairman and CEO of Japan Securities Dealers Association.
The ministry official said the date for the next meeting has not been set.
Norinchukin, with an investment portfolio of more than ¥50 trillion ($344 billion), is one of Japan’s largest institutional investors.
The ministry decided to create the panel after Norinchukin warned that it is likely to book losses of ¥1.5 trillion for the current fiscal year as a result of offloading unprofitable foreign bonds.
Norinchukin is not the only Japanese bank stung by the Fed’s aggressive rate hike drive in 2022, which pushed up dollar funding costs beyond what they received from their bond investment. But the size of Norinchukin’s projected losses stunned the global market.
The Ministry of Agriculture, Forestry and Fisheries has said the panel will also examine Norinchukin’s investment and lending to agriculture and food industries in addition to its securities portfolio management.
Government ministries set up panels of outside experts on various topics. They typically meet about once a month and last at least a couple of months. They usually submit a report at the end. Their recommendations are likely to be reflected in policy making and supervision by regulators.
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