Ownership Restrictions in Japanese Banks

Introduction

Japan has strict regulations regarding the ownership of banks, including requirements for both individuals and entities. These regulations aim to protect Japan’s financial stability and ensure that banks are managed in accordance with local laws.

Major Shareholders and Bank Holding Companies

A major shareholder is an individual or entity that holds 5% or more of a bank’s shares (or 10% or more in some cases, where the significant matters relate to financial transactions or other significant matters) of the shares issued by the bank and has exercised, or is expected to exercise, a material influence over the management or business of the bank. A major shareholder must submit reports and materials to the Financial Services Agency (FSA), as well as meet certain requirements under the Banking Law and the Securities Exchange Law.

A bank holding company is an entity that holds 25 per cent (or 20 per cent in some cases) or more of a bank’s shares. If it exceeds 50 per cent, it will be considered as control. A bank holding company must submit reports and materials to the FSA, meet certain requirements under the Banking Law, and is subject to stricter regulatory oversight.

Non-Japanese Entities Acquiring Controlling Interest

For non-Japanese entities that wish to acquire a controlling interest in a Japanese bank, approval from the FSA is required if the entity exceeds 20 per cent of the bank’s shares. The FSA will consider factors such as the entity’s financial condition, business operations, and any potential impact on Japan’s financial stability.

Non-Resident Individuals and Entities

Non-resident individuals are subject to the same requirements as resident individuals under Japanese law. However, non-resident entities may be subject to additional requirements or restrictions due to foreign ownership regulations.

Foreign Ownership Restrictions

Yes, Japan has restrictions on foreign ownership of banks. Pursuant to the Banking Law and the Foreign Exchange Act, a foreigner must obtain approval from the FSA if the foreigner exceeds 20% of shares issued by a bank or when the foreigner becomes a major shareholder of the bank.

• If a foreigner owns more than 50% of the bank’s shares, it will be considered as control. In such case, the approval is required even if the amount of shares does not exceed 20%.
• Prior approval from the Ministry of Finance may also be required in certain cases.
• There are some exceptions where a foreigner can own more than 20% of shares issued by a bank without obtaining the approval. For example, if a foreigner owns less than or equal to 25% of shares and is not expected to have any material influence on management or business of the bank, the approval from the FSA may not be required.

Conclusion

In summary, both entities and individuals can own a controlling interest in a bank in Japan, but they must meet specific regulatory requirements, such as submitting reports and materials to the FSA, meeting certain financial standards, and obtaining approval from the FSA for non-Japanese entities. The definition of control under Japanese law is based on the percentage of shares held and the entity’s ability to influence the management or business of the bank.