TOKYO — Japan’s Financial Services Agency intends to lift the ban on sharing customer information between banks and securities companies within the same group, Nikkei has learned.
The watchdog has shown financial institutions a plan which would effectively remove the regulations that have separated the operations of banks and securities companies for 30 years.
The move will make it easier for banks to handle operations related to securities, such as offering advice on mergers and acquisitions, issuing new shares and corporate bonds, and lending. It is also aimed at making it easier for companies to receive comprehensive financial services.
The FSA will set up a panel of experts in June to discuss the change, which it hopes to implement as soon as 2022 after the revision of the Cabinet Office Ordinance.
Ater Japanese banks were allowed to enter the securities business through subsidiaries in 1993, “firewall regulations” that prohibit the transfer of customer information between banks and their securities companies have remained. In Europe and the U.S., meanwhile, this regulation has been abolished, and banks are now handling both investment banking operations.
Removal of the ban is aimed at enhancing the competitiveness of the country’s financial institutions. Japan currently focuses on indirect finances, centered around bank loans.
The country also wants to accelerate industrial restructuring through M&A proposals to bank lenders, who are struggling with the coronavirus pandemic.
Europe and the U.S. are leading the way in sharing information between banks and securities companies. While the U.S. has the Glass-Steagall Act that separates the banking and securities businesses, there are no restrictions on information sharing within the same groups of a financial institution. Meanwhile, Europe has a system called “universal banking,” in which banks provide a wide variety of comprehensive financial services.
The challenge for Japan is to prevent acts that are detrimental to client companies, such as abuse of dominant bargaining positions and conflicts of interest. In Europe and the U.S., information management within each group and penalties for violations are strictly defined. Japanese securities companies that have established a strict information management system from the perspective of preventing insider trading are also calling for standards comparable to those in the West.
Initially, the new system is expected to be applied to large companies. The FSA will discuss the possibility of sharing information with small and midsize companies, but there are deep-rooted concerns, as banks are in a stronger position. The agency will more clearly define the details of the new system based on input from the business sector.
