Rural bank in Japan finds novel way to attract talent with higher pay
One rural bank has come up with a creative way to deal with the problem. Yamanashi Chuo Bank has set up an "investment advisory firm' to get around internal salary limits and attract talent to manage its ¥1.1 trillion ($7.6 billion) securities portfolio, said Yoshiaki Furuya, president of the lender.
Japanese banks tend to structure compensation plans in a way that makes it difficult to give outsized pay to specific employees. By establishing an in-house company to avoid such constraints, it shows the lengths that a bank like Yamanashi Chuo is taking to bolster its ranks in a market where expertise is running short.
"It's very important to secure good market talent,' Furuya said in an interview at the bank's headquarters in Kofu, about a 90-minute train ride from central Tokyo. "We can raise the level by using an evaluation system different from the bank's.'
While the compensation may still be smaller than that of big rivals, it's higher than what the lender would ordinarily pay, Furuya said. The advisory firm, which started operating last year, currently has two employees who are giving advice on how the bank should invest a portion of its securities portfolio.
In Japan, even small regional banks put billions of dollars into securities like Japanese government bonds and stocks to manage deposit money not used for lending. Furuya said the importance of its market operation is increasing as a profit driver.
Furuya said his bank is planning to let the firm take charge of more of its assets, and its headcount will increase in line with that process as it hires more. He didn't give specific numbers for hiring because it depends on how the business works out. It's also seeking to win investment advisory work from outside, such as other banks and nonfinancial corporations, he added.
According to Furuya, the bank could have its markets team sitting in Tokyo instead of Kofu — a scenic basin known for its vineyards and views of Mount Fuji — but that would increase the risk of employees leaving for other firms, given the abundance of job opportunities in the capital.
Traditionally made up of lifetime employees, local banks are starting to see a greater need for outside specialists who can navigate volatile markets for assets such as JGBs. After being held near zero for years by the central bank, yields on Japan's government debt have shot up, making it difficult for banks to determine when to start buying the bonds.
Furuya said Yamanashi Chuo is cautiously waiting for the right time to purchase long-dated notes, which have been under pressure this year. While its JGB holdings more than doubled in the fiscal year ended in March, it mostly bought shorter tenors such as two-year notes, he said.
"Building up a portfolio from a long-term perspective to generate stable revenues while avoiding paper losses — it sounds very simple, but it's a challenge,' he said.
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