Credit Concerns, Japanese Capital Ratios Could Slowdown FX Activity, Analysts Say

BANKS

Banks are becoming more cautious about counterparty credit risk in the interbank market and this is likely to result in a slowdown in foreign exchange activity for several quarters, some analysts believe.

Many are also concerned that Japanese banks will reduce their interbank activity to improve their capital ratios. Statistics of the Bank for International Settlements (BIS) indicate that foreign currency lending of Japanese banks is more than twice the size of U.S. banks and bigger than the