JAPAN Law and Practice Contributed by: Tomoyuki Tanaka and Henry Tan, Anderson Mori & Tomotsune
1. Legal Framework 1.1 Key Laws and Regulations Banking Act
Registered banks are permitted to provide a wide range of securities-related services, includ - ing brokerage of government bonds. However, banks are not allowed to conduct certain cat - egories of securities-related business, including underwriting of corporate bonds and stocks. Banks have to have a securities firm as their subsidiary to engage in the securities-related business. The key legislation regulating banks’ provision of securities-related services is Act No 25 of 1948 (the “Financial Instruments and Exchange Act” or FIEA) (as amended). Regulatory Body The principal regulator that exercises oversight of local banks in Japan is the FSA, which has the authority to supervise local banks if the pow - er is delegated to it by the Prime Minister. The FSA supervises banking activities (including the securities-related businesses), issues banking licences, and imposes administrative advisories (eg, business improvement orders and business suspension orders) on local banks for wrongdo - ing, lack of adequate internal control systems and/or lack of adequate capital. Off-site monitoring and on-site inspections of local banks in Japan are also primarily per - formed by the FSA. Inspections of banks’ securities-related services, on the other hand, are conducted by the Securities and Exchange Surveillance Commission of Japan. 2. Authorisation 2.1 Licences and Application Process No person is allowed to engage in “banking business” in Japan or with a person in Japan without having obtained a banking licence from the FSA first.
The principal legislation regulating local banks in Japan, including “bank holding companies” and foreign bank branches in Japan, is Act No 59 of 1981 (the “Banking Act”) (as amended). The Banking Act, among others, governs the follow - ing matters in respect of local banks: • licensing; • organisation and governance; • business scope; • customer protection; • prohibited acts; • capital adequacy; • business scope of subsidiaries and share - holders; • accounting; • disclosure; and • procedures of mergers and acquisitions. The Financial Services Agency of Japan (the “FSA”), which is the regulator of local banks in Japan, issues various guidelines (the “Guide - lines”) concerning banking activities. Local banks are, in practice, required to comply with the Guidelines and may be subject to adminis - trative actions in cases of non-compliance. Financial Instruments and Exchange Act Local banks in Japan may engage in securities- related services within the prescribed scope. Local banks in Japan are, in principle, required to obtain a licence from the FSA if they wish to provide securities-related services in Japan. This licensing requirement is in addition to the bank - ing licence that banks in Japan have to obtain for the provision of banking services.
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