Masayuki Oku, who has spent 46 years at SMFG and twice headed the Japanese Bankers Association, told Reuters his bank had already fully implemented the global package, known as Basel III, even though some aspects were problematic.

"Basel III is a universal regulatory model, and we take it, but if we go to the U.S. then our bank operation is subject to this one, and our UK operation is subject to UK regulation," he said on Thursday.

"I'm very much concerned about such unintended consequences of accumulated regulation."

The U.S. Federal Reserve has passed a rule that will force units of foreign banks operating in the United States to hold more capital and liquidity locally in order to shield taxpayers from any potential losses.

Britain has also been putting pressure on some foreign branches to become subsidiaries, meaning they would hold pots of capital and liquidity in the UK. Critics say such national measures fragment capital markets and are unnecessary because the parents of the banks have adequate safeguards.

Oku did not say specifically what his concerns were relating to the proliferation of new regulations, and whether they were just a matter of the bureaucracy involved in meeting them.

SMFG, whose stock market value of about $58 billion makes it more valuable than the UK's Standard Chartered Plc, has sizeable operations in London and the United States. Both contribute to the 33 percent of the bank's gross revenue that comes from outside Japan.

Oku hopes to grow that percentage to 40 before his term ends in two years' time. India is in his sights; a week after the election of Narendra Modi as Prime Minister, Oku said his bank was "closely watching" to see if the tightly-regulated market would become any easier to break into.

"We are always ready to expand," he said in an interview in a conference room in SMFG's London office, adding it would probably take at least a year to increase its Indian network from one commercial bank branch in New Delhi to two or three. The bank also has an Indian advisory company.

INTERNATIONAL DEALS

With Japanese credit demand still low, expansion into international infrastructure projects offered another opportunity for SMFG to deploy its balance sheet and tap into a market that consultants McKinsey said would be worth 57 billion dollars between 2013 and 2030.

Oku said his bank would like to do more international infrastructure deals, but faced regulatory obstacles because of liquidity rules introduced by global regulators.

Oku said banks like his are at a disadvantage because their deposit base is in yen but most infrastructure projects are funded in dollars, so he must use short-term dollar/yen swaps to fund long-term projects - creating a maturity mismatch that is penalised under Basel III.

Oku said he was not concerned about the level of influence Asian bankers and policymakers had on the Basel III rules, conceived at the height of the financial crisis of 2008 through 2009, but he did expect the Asian sector to be represented more in future.

"Basel III came right after the Lehman brothers shock," he said. "Japanese regulators and Japanese banks were outside of that financial crisis."

On the home front, Japanese banks including Oku's enjoyed a bumper 2013, with all three top lenders posting record earnings, largely on the back of a surging stock market, but the trio have predicted falling earnings in the year to March 2015 as the stock market's glow fades. 

Making money from core lending is more challenging, as persistently low interest rates shrink the gap between the rates at which banks lend to customers and the rate at which they borrow. Oku said his investors were accepting of the bank's return on equity target of 10 percent, even though it's lower than the mid-teen level many European banks are targeting.

Reports of a $10 billion fine on French bank BNP Paribas came as a shock, he said, but would not dissuade him from doing business in the United States.

"I was so surprised," he said of the reported fine. "In that country, compliance is coming first."

(Additional reporting by Taiga Uranaka in Tokyo Editing by David Holmes)

By Laura Noonan