TOKYO – Finance leaders of the Group of Seven (G-7) advanced economies will discuss this week ways to strengthen the global financial system, Japanese Finance Minister Shunichi Suzuki said on Tuesday, as recent United States bank failures shed light on the heightening risk of digital bank runs.
“The environment surrounding finance has changed dramatically with the emergence of social media and Internet banking,” said Mr Suzuki, who will chair the G-7 finance leaders’ gathering to be held in the Japanese city of Niigata on May 11-13.
“Responding to such changes have become a common challenge for countries across the world, including Japan,” he said, adding that the topic will be among many issues to be discussed at this week’s G-7 meeting.
The recent collapse of First Republic Bank has exacerbated investors’ worries about the US banking sector, and raised calls for better global oversight by regulators to new risks such as digital bank runs.
“Concerns over banks’ credit-worthiness have yet to subside since the US regional bank failure in May,” Mr Suzuki said.
“We’re watching the situation with a strong sense of alarm, as markets and economies are globally intertwined,” he said, adding that Japan’s banking system was stable as a whole.
Japan would aim to issue a G-7 joint communique after the finance leaders’ meeting, which may stress the need for the authorities to remain vigilant to banking-sector woes, two government sources with direct knowledge of the matter said.
“There won’t be much change to the basic message agreed upon in April,” one of the sources said on condition of anonymity as he was not authorised to speak publicly.
In a joint statement issued in April after their meeting in Washington DC, the G-7 finance chiefs said they stood ready to take “appropriate actions” to maintain the stability and resilience of the global financial system.
The Nikkei newspaper reported on Tuesday the G-7 finance leaders will discuss setting up individual emergency plans in case they face digital bank runs.
US Treasury Secretary Janet Yellen, who will travel to Japan, will tell her G-7 counterparts that the US banking system remains sound, a senior Treasury official said on Friday. REUTERS