It looks as if banks will be able to act as agency brokers in the Japanese securities markets from the Spring of 2005. Following approval by the Financial System Council, an advisory body to the Japanese Prime Minister, the Financial Services Agency (FSA) in Tokyo is reported to be expecting the submission of a bill revising the Securities and Exchange Law to that effect during next year (Js parliamentary session.
At present, Japanese banks are barred from engaging in all securities businesses except custody. Way back in 1993 a partial deregulation enabled banks to conduct securities businesses through subsidiaries, but this measure will allow them to do so directly for the first time. However, most observers in Tokyo expect the FSA to insist that banks maintain a rigid separation of their banking and securities businesses, and to set strict limitations on the scope of their securities activities.
“There are concerns over potential conflicts of interest between banks (J lending and agency operations, such as soliciting securities deals with underlying loan conditions or attempting to call back bank loans from troubled borrowers by recommending an issue of bonds and then introducing them through their agency service,” explains a spokesman for Bank of Tokyo Mitsubishi in Tokyo. The chairman of the Japan Securities Dealers Association (JSDA), which runs the over-the-counter JASDAQ market, has already expressed concern about possible conflicts of interest – but then he can scarcely be expected to welcome the competition.