With the population and the number of firms across regions declining, in addition to the current prolonged low interest rate environment, financial institutions' average contract interest rates on new loans have reached extremely low levels, owing in part to intensified competition among such institutions. In this situation, their core profitability has continued to be on a downtrend.
There also is increasingly limited room to realize gains on the sales of securities and to reverse the  10  allowance for doubtful accounts. As a result, financial institutions have been actively extending loans to middle-risk firms with relatively high credit risk and investing in assets such as foreign bonds and domestic and foreign investment trusts.