In the new phase of monetary easing, the Bank of Japan (BOJ) has purchased large amounts of long-term JGBs from financial institutions and driven down the returns on safe assets, thus encouraging financial institutions to take risks (portfolio rebalancing). Meanwhile, regional financial institutions such as regional banks I, regional banks II and shinkin banks have all reduced their holdings of JGBs whilst increasing riskier assets such as lending, especially real estate lending and housing loans, and foreign bonds and stocks. However, starting the fiscal year ending March 31, 2019, new Interest Rate Risk in the Banking Book (IRRBB) standards will be applied to domestic banks. It is feared that this will bring to light the excessive levels of interest rate risk that have been taken at certain regional financial institutions. In regions experiencing marked decline in population and the number of companies, demand for loans is weak and, as the profit margins of regional financial institutions continue being squeezed, the revised IRRBB could put downward pressure on potential earnings. The transitional arrangements for implementing new domestic standards in response to Basel III will also be phased out in the future.