TOKYO - Japan's Ministry of Finance plans to impose strict controls on the activities of securities subsidiaries to be set up by banks under the nation's financial-system reforms, according to a senior ministry official.
In the currently poor market conditions, reforms must start with a limited range of business for the new bank subsidiaries, the official said in an interview.
"It may be stricter than initially projected," he said, "but we plan to assure that we will review the range of the securities business the subsidiaries can carry out two or three years after they start business."
More Competition Is Goal
The reforms, aimed at increasing competition and efficiency by reducing barriers between financial sectors, will enable banks to conduct securities business through subsidiaries.
The ministry is now rushing to complete details of government ordinances and administrative guidances for the reform laws, which must take effect by June.
Securities houses, battered by the long-running stock market slump, urged the ministry to place strict controls on bank subsidiaries' securities business, sources said. But banks, particularly long-term credit banks, wanted as few restrictions as possible, they said.
Under the ministry's plan, the new securities arms of banks will be barred for the time being from offering broking and underwriting business for equities.
Bond Underwriting Allowed
A securities business that will be allowed to new subsidiaries of banks is underwriting convertible bonds and warrant bonds, the ministry official said. However, it remained undecided whether bank subsidiaries would be allowed to broker those equity-related bonds, he said.
Under the plan, bank officials appointed as senior executives of the new subsidiaries will not be allowed to return to the parent banks, the official said.
The finance ministry plans to impose some restrictions on subsidiaries' underwriting corporate bonds for which the parent banks are "main banks," he added.