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LDP commission proposes restricting foreign IT giants’ entry into banking business

  • May 30, 2020
  • , Nikkei , p. 5
  • JMH Translation

On May 29, the LDP Research Commission on the Finance and Banking Systems announced a proposal for deregulation of the banking industry. It is designed to address challenges such as the digitalization of banking. The LDP proposal eases the path for banking groups to invest in fintech firms, while placing certain restrictions on major overseas IT (information technology) corporations trying to enter the Japanese banking market. The government is expected to draft a revision bill based on the proposal and submit it in the ordinary Diet session next year.

 

Currently, bank holding companies are permitted to acquire only up to 15% of a corporation. Investments in corporations, including fintech firms, can exceed 15% if Financial Services Agency (FSA) approval is received. The proposal urges the government to ease the rule to permit holding companies to make investments of over 15% by just reporting the investment to the FSA.

 

The proposal also calls for restrictions to be placed on corporations’ entry into the banking business. The LDP commission argues that a certain level of restriction is necessary to maintain a fair playing field for domestic and foreign IT giants and Japanese banks. Limiting the scope of banking business that corporations can acquire is envisioned. The proposal also encourages the creation of new businesses that use the banking system and client data.

 

The commission also gave an update on the government support program for private businesses that have lost sales due to the coronavirus pandemic. According to the commission, local banks and other private financial institutions started providing interest-free loans as well as uncollateralized loans on May 1 and extended a total of 2.3 trillion yen as of May 27. So far, the lenders have approved 126,000 out of 210,000 loan applications.

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