The basic drafts of two bills to pave the way for the establishment of financial holding companies was endorsed Sept. 30 by the three parties that support the government of Prime Minister Ryutaro Hashimoto.
One bill says a financial holding company that has a banking subsidiary can hold, in aggregate with all its subsidiaries, no more than 15 percent of the outstanding stock of any one nonfinancial company.
Such a company could only have finance-related firms as subsidiaries, it says. The other bill makes an exception to existing laws by simplifying bank procedures for setting up financial holding companies.
Under current laws, a bank might encounter difficulty in creating such a company because of the complexity of such aspects as fixed collateral when trying to transfer its claims and liabilities, according to government officials.
The exception outlined in the bill would enable a bank to establish a holding company which would set up a new bank that would absorb the old one through a merger. The original bank’s shareholders would then decide at a shareholders’ meeting to relinquish to the holding company the shares in the newer bank they received through the merger. The holding company, in turn, would issue its own new shares.
In effect, the shareholders of the initial bank become shareholders of the financial holding company, and the remaining bank becomes its affiliate. The ban on holding companies under the Antimonopoly Law was scrapped earlier this year, but details dictating the formation of financial holding companies were left to be debated during the current extraordinary Diet session.