Where there’s a will, there’s a way. That’s what Japanese banks are counting on as they try to keep hold of the $460 billion in wealth left by their customers each year when they die.

With more than a million people dying annually in Japan, smaller banks are losing not only customers but also their savings, as heirs migrate to large cities where the biggest lenders hold sway. Regional banks lose about 60 percent of funds that are subject to inheritance, Fidelity Investor Education Institute estimates.

Now, in a country where about a quarter of the population is over 65, local lenders including Mie Bank Ltd. are turning to trusts to secure the next generation of clients and their deposits. They’re selling so-called testamentary substitute trusts, an inheritance product that helps to quickly unlock funds when an estate holder dies. Setting them up enables banks to form relationships with heirs.

“When succession occurs through the death of an elderly customer, often their sons and daughters live in or around Tokyo, and it was a problem that our deposits were flowing out into the big city,” said Kazuhito Wakiuchi, a manager at Mie Bank in western Japan. It plans to start selling such trusts in July in partnership with Mizuho Financial Group Inc., the nation’s third-largest banking group.

Getting Richer

Assets of wealthy Japanese have grown to $7 trillion

Source: Capgemini Financial Services Analysis, 2017

Banks began offering such trusts about a decade ago, and more than 150,000 were in effect as of December, Trust Companies Association of Japan data show. The products have grown in popularity because they can help heirs cover immediate expenses such as funeral costs, and estate holders can choose to leave lump sums or have their funds distributed gradually over time.

Working on inheritance is also helping banks reduce dependence on lending income that’s eroding as Japan’s rock-bottom interest rates squeeze margins, according to Fitch Ratings Ltd. With competition for lending intensifying, the nation’s financial regulator has been urging banks to find other ways to build a sustainable business model.

“Succession business is a key area to secure the survival of regional banks,” said Kaori Nishizawa, a director for financial institutions at Fitch in Tokyo. Demand for trust products will rise as the population ages, and banks earn fees when they sell them, she said.

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