No more full gov’t support for Shoko Chukin Bank after stake sale recommendation: report

The potential stake sale is a governance risk, Moody’s warned.

Don’t expect much government support for Japan’s Shoko Chukin Bank if it hits hard times in the future, according to Moody’s Japan K.K.

In a commentary, the ratings agency placed the bank for a ratings review downgrade, after a board of experts working for the government recommended that officials sell its entire equity stake in the bank within two years after the Shoko Chukin Act is revised.

“The stake sale will likely undermine Moody's current expectation that the bank would receive full support from the Government of Japan when needed,” Moody’s wrote.

The revision to the Shoko Chukin Act–which is necessary for the stake sale–will likely be submitted to the current ordinary Diet session, which will end around June, Moody’s estimates.

ALSO READ: Nomura Holdings’ net income up 11% to $508m in Q3

The board of experts also recommended a revision to the Shoko Chukin Act so that the bank will voluntarily return the Special Reserve Fund to the government once its financial fundamentals improve. 

“Moody's regards the potential stake sale and the likely changes it may bring to the bank's corporate governance, financial strategy and risk management as a governance risk under its environmental, social and governance (ESG) framework,” the report said.

The Shoko Chukin Bank, headquartered in Tokyo, is a joint-stock bank that operates in all Japanese prefectures. Its consolidated assets totaled JPY13t as of the end of September 2022, according to Moody’s.