The ruling-party lawmakers are looking to make it easier for banks to expand into different industries, a step that could help traditional lenders push back against tech rivals.
The Liberal Democratic Party’s financial policy research panel wants to amend the banking law next year to relax limits on lenders’ lines of business as well as their investments in nonfinancial firms. The proposal, released last week, didn’t specify which areas banks might be allowed to enter.
Japan’s government has been trying to improve financial services by giving tech firms and other outsiders a bigger role in the industry. Now some politicians see a need to boost lenders, which have been suffering from years of rock-bottom interest rates and are busy supporting businesses and households hurt by the coronavirus-fueled recession.
“We are no longer in an era where we need to straitjacket banks with regulation,” Seiji Kihara, deputy chairman of the LDP’s Policy Research Council who is leading the proposal, said in an interview. “You can’t support regional economies only through fintech.”
Money transfers are one area where Prime Minister Shinzo Abe’s administration has eased restrictions for tech companies that are getting into finance. Another is open banking, which allows fintech startups to tap bank customers’ information with their consent to run things like personal finance apps.
Banks argue that the deregulation should work both ways. “While keeping with the spirit of regulation, it’s important to secure an equal footing among players,” Japanese Bankers Association Chairman Kanetsugu Mike said at a briefing on June 18.
One business outside of finance where banks might make money is advertising. Lenders could charge advertisers to target online banking customers based on their transaction information, much like tech companies do on their platforms, according to Jefferies analyst Hideyasu Ban.
In Singapore, some banks have gone into e-commerce after authorities there eased restrictions on stakes they can take in nonfinancial businesses.
The LDP lawmakers also want to relax limits on lenders’ stakes in companies outside of the industry. The current law allows bank holding companies and their units to own no more than 15 percent of nonfinancial firms.
At the same time, the panel may also seek to tighten rules for companies that want to get into banking, said Kihara, who sits in the Lower House.
Tech companies Sony Corp. and Rakuten Inc. and convenience store operator Lawson Inc. are among large Japanese firms that have received banking licenses, and Kihara pointed to the possibility of global giants including Facebook Inc. and Apple Inc. eventually doing the same.
The LDP aims to include the panel’s proposals in its growth strategy and then have the government incorporate them in its annual policy framework to be released as soon as next month. If they are included, a bill will probably be submitted to the Diet next year.