Japan to Ease Investment Rules to Make it Easier for Banks to Invest in Fintech Firms

Japan is reportedly planning to ease its investment rules and requirements, in order to make it more convenient for banks to invest in Fintech companies.

The country is hoping that more relaxed investment guidelines will promote the local lending industry. The lenient policies should help Japan transform its outdated business model by adopting the latest financial technologies.

Although major IT businesses, like Amazon.com, have been exploring the nation’s financial services sector, Japanese banks are dealing with various restrictions when it comes to providing “non-core” banking services.

As noted by Nikkei, bank holding firms require approval from Japan’s financial regulator, the Financial Services Agency (FSA), in order to acquire a stake of more than 15% in non-financial firms.

The Japanese government said it would ease these rules so that banking service providers would only be required to report their investments in Fintech firms to the FSA. They would not need to obtain approval in advance.

The proposal should simplify the process of offering new services based on client requirements. Current guidelines require systems development and advertising businesses to generate 50% or more of their earnings from bank-related services.

However, if this rule is changed or lifted, then developers will be able to sell products like settlement systems to more customers, meanwhile, advertising units would have the option of selling ads to mortgage borrowers.

Deregulation or more flexible rules could make it simpler for banking and brokerage firms operating within the same banking units to share client information. At present, Japan’s banks have to obtain consent from their clients, which makes their jobs harder when compared to their overseas competitors.

The Liberal Democratic Party (LDP) team said it aims to allow banks to provide real estate brokering services in the country, however, this would only include deals like sale of properties by clients who are already receiving reorganization assistance from local banks.

Banks might also be permitted to lease the property when they shut down a branch.

The LDP will aim to restrict nonfinancial service providers from entering Japan’s banking sector, potentially by limiting the type of banking services they can offer.

Japan’s ruling party members will be preparing a proposal, which will become part of (if approved) a nationwide growth initiative (expected in June 2020).

The party plans to release an update to the nation’s banking act to the parliamentary session that will be held in January 2021.

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