A strong savings culture in Japan means the nation’s banks have access to cheap funds in the form of billions of dollars of consumer deposits. Japanese banks are partially protected against the difficulties currently faced by big banks. Japanese banks are less dependent than European banks on foreign capital, which is becoming more expensive because of the ongoing European crisis.
Not surprisingly the Japanese banks are looking for lucrative markets to invest their funds and Australia’s home loan market is well and truly on their radar.
It has been reported that three of Japan’s banking giants: Mitsubishi UFJ Financial Group (worth $62bn), Sumitomo Mitsui Financial Group ($42bn) and Mizuho Financial Group ($35bn) are looking at opening up web-based consumer banking operations in Australia.
Mizuho Corporate Bank is already registered by the Australian Prudential Regulatory Authority (APRA) as a Branch of a Foreign Bank that’s regulated by APRA in accordance with the Banking Act of 1959.
Sumitomo Mitsui Banking Corporation also appears on the list.
A branch of a foreign-owned bank can’t accept deposits from individual Australians of less than $250,000 and is not covered by the government’s deposit guarantee but it can offer loans to Australian customers.
Other emerging Asian countries, such as China and India are included in APRA’s Branch of a Foreign Bank Listing. These include the Bank of China or the State Bank of India.
More competition from foreign-owned banks could be exactly what you’re looking for if you are in the market for a home loan this year.
The Japanese banks would be interested in taking market share from our bigger, well-established banks and they wouldn’t hesitate to pass on RBA interest rate cuts in order to win customers.
This would certainly make life interesting for the Big 4 Banks (CBA, Westpac, NAB and ANZ) who’ve already made it clear that they may not pass official interest rate cuts on to their home loan customers.
A foreign-owned bank can provide a home loan.
Authorized Deposit Taking Institues (ADIs) with Australian ownership or that are Subsidiaries to foreign banks must meet strict capital adequacy governance, and risk management requirements enforced through APRA.
Because they are not allowed to deposit money from Australian customers, branches of foreign-owned banks are not required by law. They are allowed to take deposits for more than $250,000 ( that don’t come under the government’s deposit guarantee) or from corporations and other entities, deemed to be able to look after their own interests and cope with the risks involved.
Many Australians have bank account with foreign subsidiaries of banks such as HSBC, ING or ING.
Although there is a growing number of branches of foreign branches of banks that are covered by APRA, branches don’t have to adhere to the same requirements as their subsidiaries. Branch offices do not have to meet the same capital requirements as subsidiaries.
Borrowing money isn’t as risky than giving your life savings abroad to a bank. Foreign branch banks may offer home loans if you are willing to pay a fair price.