These numbers far exceed the ratios of roughly 20% of GDP that prevailed in Mexico, Argentina, and Brazil, countries that also experienced considerably slower domestic loan growth in the years preceding the recent crisis. The systemic risks implied by weak regulation may be much more severe in countries with relatively large banking systems. This observation is not unique to developing countries.
We have invited today representatives of banks which are subject to international capital standards to explain the background and the Bank of Japan’s view on the decision. The funding conditions for firms have deteriorated rapidly since last autumn due to the increased strains in global financial markets after the collapse of Lehman Brothers.