Expand Banks’ Businesses to Promote Economic Growth in Regional Areas

Banks should play a role in supporting their local economies by improving profits through undertaking a wide range of operations.

The Financial Services Agency plans to allow banks to expand the scope of their operations so that they can earn money in fields other than their core businesses, which include lending. The agency plans to submit a bill to revise the Banking Law to the ordinary Diet session early next year. It is primarily intended to be utilized by regional banks.

The Cabinet of Prime Minister Yoshihide Suga has set as one of its policy issues the stabilization of regional banks’ business in order to boost regional revitalization.

To this end, with the Cabinet’s intention of encouraging realignment, the FSA has set up a subsidy system for banks that are to be integrated. The Bank of Japan has established a framework to tack interest onto current account deposits held by the central bank.

Furthermore, by allowing them to expand their operations, the FSA is aiming to strengthen regional banks’ management bases.

In addition to depopulation and super low interest rates, the novel coronavirus pandemic has made the management of regional banks more difficult. It is understandable that the government intends to help them boost profits through deregulation.

Banks are strictly regulated on the kinds of business they can conduct outside of their core business. This is meant to ensure fair competition with ordinary companies and avoiding the risk of losses to depositors in the event of a business getting into trouble.

However, there must be many cases in which banks can utilize the know-how they have accumulated and their personnel for non-core businesses.

If a bank sells a customer management system and payment system it has developed for in-house use, the sales could contribute to the digitization of local companies. It is also possible for a bank to start a service in which employees watch over the elderly.

The FSA intends to allow banks to engage in eight areas of business through subsidiaries.

It should be noted, however, that advertising businesses using customer data are being considered. There is concern that customer information held by banks may be misused. The FSA should closely monitor such businesses to see that they are properly conducted.

A close eye should also be kept on sales to borrowers when the bank has the upper hand.

The revision bill is also expected to include deregulation of investment.

Currently, investment by banks in ordinary companies is regulated, and they are allowed to invest 100% of the capital in companies through their subsidiaries only for the purpose of business revitalization, succession of the business or support for start-ups.

In addition, the FSA plans to allow 100% capital investment in unlisted companies that carry out such activities as promotion of tourism and sales promotion of local products.

The move is aimed at stimulating regional economies by encouraging banks to be actively involved in the management of local companies. It is hoped that regional banks will grow together with local companies.

— The original Japanese article appeared in The Yomiuri Shimbun on Dec. 21, 2020.