Japanese banks’ hunt for capital resumes

Sumitomo Mitsui Financial Group, Japan’s second largest lender, is marketing a dollar-denominated 10-year Basel III note in an effort to replenish capital lost under the regulation’s grandfathering arrangements.

The Tier 2 subordinated bond, which is likely to be priced on Wednesday, is being issued a week after Japan’s third largest bank Mizuho Financial Group’s Basel III-compliant note, highlighting a need for Japanese banks to raise capital in the coming months.

Desmond Lee, bank credit analyst at Morgan Stanley, wrote in a report on March 14 that there is at least $12 billion of legacy capital lost each year under Basel III’s grandfathering arrangement. This...