SINGAPORE—Seven Japanese regional banks have teamed up to create a financial technology research company that aims to leverage AI and robotic process automation (RPA) technologies to survive declining loan demand and ultralow interest rates that have pushed banks into partnerships and consolidation just to stay afloat.
Senshu Ikeda Bank, Gunma Bank, San-in Godo Bank, Shikoku Bank, Chiba Kogyo Bank, Tsukuba Bank and Fukui Bank are set to take a stake of a little over 14% in the joint venture each, which will have $916,000 (100m yen) in initial capital, Singapore Business Review reported.
The joint venture will leverage AI to analyze deposit account activity and study technologies to reduce office work and bring costs down for the embattled financial sector.
“Although ultralow interest rates engineered by the central bank are shared by all players in Japan's banking sector, regional banks have been bearing the brunt of the problem as net interest income - which accounts for 90% of their operating profits - continues to trend downwards and squeeze profit margins,” Singapore Business Review reported.
The safeguards of regional banks are similarly caving under pressure as capital adequacy ratio fell to 9.9% in September 2017 compared to 11% in March 2014, Singapore Business Review reported, noting that the declining capital buffers lower the banks’ abilities to withstand a large negative economic shock.