HTML Preview Investment Banking Memo page number 1.
ANDERSON MORI & TOMOTSUNE
Financial Services & Transactions Group
MEMORANDUM
December 1, 2005
RECENT AMENDMENTS TO THE BANKING LAW
We wish to take this opportunity to provide a brief update to our clients regarding the recent
amendments to the Banking Law of Japan (Law No. 59 of 1981, as amended) and other
relevant laws by “the Law Amending Part of the Banking Law, Etc.” (Law No. 106 of
2005; the “Amending Law”).
Amendment of Banking Law
The Amending Law was promulgated on November 2, 2005, and will be expected to be in
force from April 1, 2006. The Amending Law will open the door for non-bank companies,
such as convenience stores and real estate agents, to become agencies of banks in order to
diversify the sales channels of banks and improve convenience for customers.
Background
Under the current Banking Law, bank agency regulation is very strict and non-bank
companies are virtually prohibited from engaging in bank agency businesses. A non-bank
company can be an agent of a bank only in the case where (i) the company is a
wholly-owned subsidiary of the bank, and (ii) the company only engages in such agency
business (Article 9-3, Paragraph 2, Item 10 of the Enforcement Regulation of the Banking
Law). There have been requests from department stores, supermarkets and convenience
stores etc. that they be entitled to provide banking services such as opening deposit
accounts or making individual loans (loans extended to individuals) on behalf of banks in
order to attract more customers. Real estate agents and automobile dealers wish to deal
with housing loans and automobile loans of banks in order to respond to customers’ needs
for a one-stop service. Also, banks, especially banks which specialize in internet banking
businesses and do not have many branches, have requested that such regulations be relaxed
so that they can expand their sales channels.
Rules regarding Bank Agency Businesses
The Amending Law includes a definition of a “Bank Agency Business” (“ginko-dairigyo”),
which means a “business conducting any of the following businesses on behalf of a bank
L02-#258770-v5