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Bloomberg
Japan needs to remain vigilant about its banks’ overseas investments in bundled credit products because the underlying loans may be less spread out across industries or individual companies than they appear, a senior regulatory official said.
‘’Even if banks individually think they are well-diversified, it is possible that overall risks in the market are concentrated in the same sector or the same debtors,†said Tokio Morita, director-general of the Financial Services Agency’s Strategy Development and Management Bureau. “It is important for us to continue to analyse the situation closely†to prevent trouble for the financial system.
Regulators were signalling caution about the rapid expansion of the collateralised loan obligation market, fearful that products could be vulnerable to downturn in global economy.